As Iran's new year dawns, sanctions keep economic outlook in the dark

http://www.theguardian.com/world/2014/mar/24/iran-new-year-economy-inflation

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With the Iranian new year that began last Friday, leaders are attempting to manage the expectations of a public who have seen few signs of the economic improvement promised by President Hassan Rouhani when he took office last August.

Despite some progress towards a lasting nuclear deal that could potentially end years of crushing sanctions, fiscal growth has been slow, and many worry that this year – 1393 on the Iranian calendar – will bring even leaner times.

"The Rouhani government is under a lot of domestic and international pressure, and considering the limited resources and authority his administration has, we cannot expect much from them," said Hassan Sanati, a manager in a Tehran housing agency.

While currency rates have stabilised at more than 10% above where they were when Rouhani was elected last June, little has changed for most Iranians, who are struggling to make ends meet.

Nowruz, the Iranian new year, is celebrated at the beginning of spring. It predates Islam by many centuries but continues to be an important part of Iranian identity and is the country's main holiday.

Following the start of the new year and the Nowruz holiday vacation, prices are set on a range of goods and utilities, and the annual budget is implemented. In recent years, it has often meant sharp price increases for petrol and other sources of energy.

In its annual report, the ministry of economics and finance said Iran is still suffering from high inflation and deep stagnation, which has led to negative growth of more than 5% in the past year.

The continued bad news has prompted Iran's supreme leader, Ayatollah Ali Khamenei, to ask Iranians to embrace what he calls a "resistance economy", which means more reliance on domestic production and less rampant consumption of imports.

The resistance economy "is a long-term solution for the country's economy and for achieving the lofty economic goals of the Islamic establishment", Khamenei recently told a gathering of economists in Tehran.

Although Khamenei remains adamant that his plans do not constitute austerity measures, many Iranians believe they will be asked to sacrifice more in the coming year.

"We are accustomed to an increase in utility prices each year, but now they are talking about increasing petrol by 30% while the government has only promised to give our salary a 20% increase," said Masoud Mirahmadian, a 33-year-old government office worker. "All in all, I am not hopeful."

Rouhani is also planning reforms to the monthly cash payout programme that his predecessor, Mahmoud Ahmadinejad, implemented in late 2010. The payouts replaced heavy state subsidies on many goods and services.

To offset high prices during Nowruz, Ahmadinejad last year ordered a one-off payment of about $25 to most Iranians' bank accounts.

Rouhani, who opposes the cash handouts, offered an alternative plan to help Iranians cope with the high prices of the holiday season this year. In February, his administration made available baskets of goods to millions of Iranian families that included staples such as rice, cheese, chicken, cooking oil and eggs.

The plan backfired, however, when many people on lower incomes were deemed ineligible to receive the handout, and others complained about the poor quality of the goods.

Rouhani apologised in a televised interview and set up 400 price-controlled temporary markets, including four in the capital.

At one such market in Shahrak e Gharb, in western Tehran, hawkers sell everything from locally sourced goat cheese and organic foods to knock-off designer bags and T-shirts. Business at the market is brisk.

"There isn't any shop in the neighbourhood that has everything for sale. For the holidays, it's so convenient to not have to run around the city. I wish the market was here all year long," said Fatemeh Rezaie.

But not everyone is satisfied with the markets, and some consider the initiative a cosmetic fix amid larger difficulties around the corner.

"It's brought so much extra traffic to the neighbourhood, and for what? People come here and end up spending too much money because they think they're getting a good deal," said Khashayar Mozaffari, a retired accountant who lives nearby.

Ali Kashani, who sells locally produced plant extracts used in popular Iranian drinks, said that no matter how much of his product he sells, he will lose money at the market.

"Shoppers love it because the prices are low and controlled, but for us it doesn't make sense to sell here," Kashani said. "I live an hour away, petrol is expensive and so are our production costs. But I'll stay until the end, and hopefully find some long-term customers."

This article appeared in the Guardian Weekly, which incorporates material from the Washington Post