Observations about the Islamic Republic of

Iran’s Economic Stewardship

Presenters:

Mohammad R. Jahan-Parvar
Pooya Nasseri

Moderator:
Shervan Fashandi
1
February 28, 2021
 •Iranian economy never recovered from the
Economic Performance Shock of ’79
•Iranians continue to pay a hefty price for their
under I.R. decision; see Jahan-Parvar (2016)

2
Iran is relatively isolated from the global
economy

3
Comparison with ME
and the World
• The last two decades were
simply lost, which
constitutes a lost
generation …
• The ramifications will be
felt for decades to come!

4
The “real” comparison with neighbors

•PPP-based gap between Iran

and ME neighbors has
remained persistent and has
been widening over the last
decade.
•The decline in income levels is
real, and has implications for
public health, social safety net,
security, …

5
Monetary Policy and •The enormity of failure is quite obvious
in the figure …
Inflation

60
End-of-Year Inflation, in %, IMF
50

40

30

20

10

Iran Middle East (Region) World 6

Changes in Net Capital Change in Net Capital Stock, CBI

Stock 6.00

• Alarming and significant 5.00

decline over the last JCPOA

4.00
decade.
• JCPOA did not affect this 3.00

trend.
2.00
• Net capital formation is
now negative! 1.00

• This implies long-term 0.00

growth challenges. r -0
6
r-0
7
r-0
8
r -0
9
r-1
0
r-1
1
r -1
2
r-1
3
r-1
4
r -1
5
r-1
6
r-1
7
r -1
8
r-1
9
r -2
0
a a a a a a a a a a a a a a a
M M M M M M M M M M M M M M M
-1.00

7
 Warning signs
about human
capital formation-I

• Deterioration of the physical

capital stock is spilling over to
human capital.
• Iran’s educational attainment in
the ME region is slipping, and
faster than expected.
• Bodes ill for future FDI

Source: TIMSS
8
Warning signs
about human
capital
formation-II

9
Warning signs
about human
capital
formation-III

10
Warning signs
about human
capital
formation-IV

11
Labor Force
Participation
Rate

12
 Labor Force
Participation:
Not even
catching up
with neighbors!

13
Even Worse
for Women
Rank: 6th
from last!

14
 Iran
Corruption
Rank
2010 - 2020

15
 After 12 years of non compliance Iran has been backlisted by AFTA
and that means further financial isolation for the country

FATF- February 2020:

High-Risk Jurisdictions subject to a Call for Action - Iran

Blacklisted High-risk jurisdictions have significant strategic deficiencies in their regimes to
by FATF counter money laundering, terrorist financing, and financing of proliferation.
For all countries identified as high-risk, the FATF calls on all members and
urges all jurisdictions to apply enhanced due diligence, and in the most
serious cases, countries are called upon to apply counter-measures to protect
the international financial system from the ongoing money laundering,
terrorist financing, and proliferation financing (ML/TF/PF) risks emanating
from the country. This list is often externally referred to as the “black list”.  *  

16
Summary

• Iran’s economic problems are not due to international (or U.S.) sanctions.
• A better characterization is that sanctions are a manifestation of Iran’s
economic isolation.
• Sanctions obviously impose a cost; but are not the root cause of troubles.
• Some colleagues refer to economic policies of the I.R. as “consuming” the
country. I find this term to characterize the nature of the I.R. system well.