MICRO

ECONOMICS

ASYNCHRONOUS SESSION 1 B

ANALYSIS ON IMPACT OF COVID 19 ON IRAN

NAME: Radhika Singhania

REG. NO.: 1920343

DATE: 23/05/2020
IMPACT OF COVID 19 ON IRAN:

The global economy is facing a major threat due to the pandemic and the health of millions of
people are on the verge, but its impact on Iran, one of the epicenters of this outbreak has been
very severe. Iran was one of the first countries outside China to have a rapid increase in the
number of cases of coronavirus disease 2019 (COVID-19). It is among the top 10 hardest hit
countries with official figures of nearly 75,000 confirmed cases and over 4,600 deaths. This is
not just it. It is likely to increase in the coming days and the economic fallout is likely to be
wide-ranging and severe which will hamper’s the ability to effectively respond to the crisis. It
is estimated that the impact on GDP will be around 15% and in worse cases reaching as high
as 30%. This will result in massive in job losses, which in turn will lead to political and social
unrest in the near future.

Impact on employment-

The Iranian labor market was already suffering from high unemployment rates long before the
pandemic started, especially among college-educated youth. In the best-case scenario, the
pandemic will lead to economic contraction that will put 3-4 million jobs at risk pushing the
now unemployment rates from 20% to 35% in just few months. Similar to other countries like
the U.S. and Europe, may sectors that employ more than half of all working Iranians, will get
hit the hardest. The timing of the pandemic is so worse that the Persian new year that is the
most profitable period has been affected.

The people working in the informal economy and daily wage earners, that make up the quarter
of the working Iranians, will be the worst affected. With little savings and no fixed salaries,
they are most likely to the risk of livelihood and are most likely to be infected in order to
support their daily living. Th Iranian government has shield away from imposing stricter
quarantine measures as the strict measures would immediately push an additional 20% of
people into poverty. Th Iranian government seems to have chosen economy in the the medium-
run tradeoff between the economy and the public health.

The government’s response-

Despite the government’s policies regarding the quarantine, 3-4 million job losses seem
inevitable. The government, as a result, is scrambling to offer loans to 23 million households
who are already receiving monthly cash transfer subsidies known as Yaraneh. However, many
families of two continue to live just above the poverty line. The government has also decided
to make these loans interest free.

The small gestures made by the government remains unlikely to address the public’s profound
dissatisfaction with how the government has managed both the economy and the pandemic.
The pandemic related economic downturn has only added to the already high level of
frustration among majority of the people. The Iranian economy also have little to no capacity
to create additional white-collar jobs that is needed to absorb millions of educated young
university graduates.

If these conditions- widespread job losses and the subsequent harsher labor market conditions-
are not addressed immediately and effectively, it will result in more political instability and
social unrest. The government now faces one of the worst crisis- if not the worst- since the
1979 revolution, and there is very little that the government can do to address this economic
fallout.

Counterbalancing effects-

The global nature of the COVID 19 crisis is potentially counterbalancing these developments.
Economies around the world have been severely affected by the pandemic. It is also impossible
to ignore the central role of U.S. sanctions in the recent faltering of Iran’s economy and its
capacity to fight the disease. The U.S. administration imposed additional sanctions on Iran and
pressurized the IMF to reject the Tehran’s request of an emergency loan of $5billion. Trump
seeks to choke the Iranian economy at the time when the country and the world are hit hard by
the pandemic. Against this backdrop, the Iranian public may actually show empathy and
solidarity with their government. Having history as the example, the Iranians tend to unite
during the time of exacerbated and exploited by hostile outside forces.

Despite the fact that the Rouhani’s government is growing unpopularity due to its widespread
mismanagement of the economy and the pandemic, and the resulting economic and public
health crisis, there is as yet no sign of social unrest. On the contrary, as of now, if anything,
there seems to be an increasing sense of unity and empathy among the public. How long this
will last is quite uncertain, but one thing that is very clear is how the Iranian government
responds in the weeks and months ahead to what may well be its biggest challenge yet is likely
to have a deep impact on Iran’s economy and society for years to come.
REFERENCES:

• Could the Impact of COVID-19 Herald Promising Changes in Iran? (n.d.). Retrieved
from https://thewire.in/world/covid-19-iran-political-changes
• COVID-19 to Adversely Impact 15 Percent of Iranian GDP. (2020, April 10). Retrieved
from https://financialtribune.com/articles/domestic-economy/102761/covid-19-to-
adversely-impact-15-percent-of-iranian-gdp
• Keynoush, B. (2020, April 29). Socioeconomic Impact of COVID-19 in Iran Could
Outlast Physical Harm. Retrieved from https://insidearabia.com/socioeconomic-
impact-of-covid-19-in-iran-could-outlast-its-physical-harm/
• Hafssa Fakher el Abiari - Hafssa Fakher el Abiari, Abiari, H. F. el, Abiari, H. F. el,
Abiari, H. F. el, Dardar, J., & Train Journey. (2020, April 18). How the COVID-19
Outbreak Is Impacting Iran. Retrieved from
https://www.moroccoworldnews.com/2020/04/299931/how-the-covid-19-outbreak-is-
impacting-iran/
• Al Jazeera. (2020, May 17). Iran's businesses struggle to stay afloat amid COVID-19.
Retrieved from https://www.aljazeera.com/news/2020/05/irans-businesses-struggle-
stay-afloat-covid-19-200517105707440.html