Can Iran afford a war

Iran attacked the United States targets two days back after the killing of their top General Qasem Soleimani in a U.S. airstrike, leaving some investors asking if the overall situation would lead to war. Officials of both Iran and the United States said that they’re not looking for a war. Several geopolitical experts said that Iran couldn’t afford a war at this stage as compared to the United States. That’s partly because of the weakened economy of the Islamic after years of punishing sanctions.

To be obvious, the latest statistics about the economy of Iran from official sources not available yet. However, below six charts might shed some light on the present condition of the Iranian economy.

Iran’s Economy in decline

International sanctions to restraint in Iran’s chase of a nuclear program have for years crippled the economy of the country.

Iran’s Economic Slump

Below numbers indicate year-on-year percentage change in real GDP

Can Iran afford a war with U.S.

Source: International Monetary Fund (IMF) October 2019, multiple news sources. 2019 and 2020 figures are IMF forecast.

Iran received some relief from sanctions when it settled on an agreement with six major powers in 2015 to limit its nuclear program. However, the U.S. President Trump restored the United States sanctions on Iran in 2018, that once again sent the country’s economy into a nosedive.

Declines in the oil sector

According to the World Bank, Iran forecasted to have the fourth-largest crude oil reserves of the world. Maximum of the economic growth of the country, as well as government revenues, depending on the crude oil sale.

Iranian Crude oil

Can Iran afford a war with U.S.

Source: International Monetary Fund (IMF) October 2019. 2019 and 2020 figures are an estimate of IMF.

The restriction on the sale of Iran’s oil was also among the sanctions of the U.S. that Trump restored two years back. That is one of the main reasons why analysts, including the IMF, forecast the production as well as exports of Iranian crude oil to decline.

Shrinking Trade of Iran

The drop in Iranian oil exports along with the international restrictions placed on other sectors such as maritime, mining and banking, caused the overall trade of the country with the rest of the world to shrink.

Iran’s trade with the world

Numbers signify total goods and services trade

Can Iran afford a war with U.S.

The International Monetary Fund forecasted the exports of the country might fall below its imports in 2019 and 2020.

Rising Living Costs in Iran

The Central Bank of Iran sustained a steady official exchange rate of forty-two thousand Iranian rials per the United States dollar. However, the Iranian currency is much weaker as compared in the unofficial market, weakening to as high as 140,000 rials per dollar this month after the heightened tensions with the United States, according to Bonbast.com, a foreign exchange website.

Inflation in Iran

The chart shows the annual rate of change (%) in consumer prices.

Can Iran afford a war with U.S.

Source: IMF (October 2019), Central Bank of Iran. 2019 and 2020 figures are IMF forecast.

The weak currency of Iran contributed to high levels of inflation – that the World Bank said peaked at about 52% in May 2019. That elevates the costs of living in Iran at that time when job opportunities are lacking.

High Unemployment Rate

One major implication of a stagnant or falling economy is rising unemployment rate, that seen in Iran.

Iran’s Labor Market

The chart shows the trend in the unemployment rate (%)

Can Iran afford a war with U.S.

Source: International Monetary Fund (October 2019), National Statistics Office of Iran. 2019 and 2020 figures are IMF forecasts.

According to the World Bank, the deficiency of employment opportunities might worsen poverty in Iran. It noted that the poverty of the country, calculated by the proportion of people whose buying power is under $5.50 in a day, had mounted from 8.1% in 2013 to 11.6% in 2016.

Widening Fiscal Deficit

The government of Iran limited the finances to initiate measures to lift the economy of the country. That has been worsened by whole subdued economic activity and restrictions on the sale of oil overseas, because of the sanctions in place.

The fiscal position of the government of Iran

Can Iran afford a war with U.S.

Source: International Monetary Fund (October 2019), Finance Ministry of Iran. 2019 and 2020 statistics are IMF forecasts.

These fiscals would restrict the ability of Iran to fund a war; however, some experts said Tehran might still ramp up its anger against the United States by using its proxy forces all over the Middle East, stretching from Yemen and Syria to Afghanistan.

Read Also: Iran launched many missiles at multiple bases housing US Troops in Iraq

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