Tehran Chamber Warns of Widespread Stagflation

TEHRAN (Iran News) At the meeting, senior figures including Saeed Shojaei, Deputy Minister of Industry, Mining and Trade (MIMT), and Farshad Moghimi, head of the Industrial Development and Renovation Organization (IDRO), presented reports on hidden costs of production, industrial renewal, and transport fleet modernization.

Dawood Rangi, a board member, said imports of corn – a vital feed component – had dropped 8% compared with last year, leaving poultry farmers struggling. He claimed feed importers now wait up to nine months for foreign currency allocations, while the government owes poultry farmers $3.8 billion.

Rangi accused state-owned companies of crowding out private importers while incurring higher costs. “Firms that created crises are now presented as saviors,” he warned, urging the president to increase the currency allocation for essential goods by $3 billion.

The chamber’s president noted that a proposal for a secondary foreign exchange market had been submitted to the central bank, potentially allowing exporters to finance imports directly.

Hamidreza Salehi, another member, criticized the foreign exchange repatriation system, which obliges exporters to return earnings under strict terms. He demanded clarity on how the government manages revenues from energy and commodity exports, warning that current rules stifle private sector activity.

Salehi also urged tighter oversight of withdrawals from the National Development Fund, insisting they must be conditional on repayment and transparency.

Board member Farzin Ferdis argued that entrenched economic “narratives” prevent structural reforms. He highlighted misconceptions such as “complete self-sufficiency,” “price controls to fight inflation,” and the belief that Iran can sustain growth without foreign investment.

“These narratives increase resistance to reform and worsen inefficiencies,” Ferdis said, stressing the need for a shift toward export-driven growth, competitive markets, and greater private sector input in policymaking. “Widespread Stagflation”

Chamber President Mahmoud Najafi Arab delivered the starkest warning, citing fresh economic data. He said Iran’s economy is sliding toward stagflation – low or negative growth combined with persistent inflation. “Widespread Stagflation”

Between 2011 and 2021, GDP growth averaged just 0.29% annually – the weakest in four decades. While growth rebounded to 4.3% in 2020–22, it slipped to around 3% in 2023. The oil sector, a key driver of the economy, saw value-added growth collapse from 14.3% in 2022 to 6.2% in 2023. Industry, mining, and construction also contracted. “Widespread Stagflation”

A parliamentary research report showed industrial output fell 10.3% in early 2024, with sharp declines in metals and automotive production. Household consumption shrank for the first time since the pandemic.

Najafi Arab listed nine structural obstacles, including reliance on oil, entrenched inflation above 30%, bureaucratic red tape, corruption, an onerous tax regime, underinvestment in infrastructure, fiscal deficits financed through banking, capital flight, and state price controls.

He warned that without decisive action, “the economy will face even harsher conditions by year’s end.” The IMF projects Iran’s 2025 growth at just 0.3%, with inflation at 43.3%.

Deputy Minister Shojaei cautioned that energy, once Iran’s main competitive advantage, is now becoming a liability. He said real industrial electricity costs are nearly three times official tariffs due to hidden charges.

With 124 days of power cuts last year and as many as 150 expected this year, he said supply limits and rising costs are eroding industrial resilience. “Every broad-based pricing policy destroys industry’s ability to endure,” he stressed, urging non-pricing policies such as efficiency gains and demand management.

Chamber members echoed concerns. “Beyond sanctions, Iranian producers face costs that competitors in Turkey do not,” said Alireza Kolahi, noting that even energy is no longer cheap. Some called for importing electricity to stabilize supply.

IDRO chief Farshad Moghimi reported that of Iran’s 41 million vehicles, over 22 million are obsolete. In 2023 alone, 350,000 were scrapped, saving an estimated $1.3 billion and reducing pollution.

He emphasized that fleet renewal is not just about scrapping old vehicles but about cutting energy consumption, curbing emissions, and creating jobs in recycling and manufacturing.

Government spokesperson and board member Fatemeh Mohajerani defended the administration, saying delays in addressing business demands stem from bureaucracy rather than lack of will.

Yet some members argued that the economy has become more state-dominated. “Government should regulate, not dominate, economic affairs,” said Ali Taghavi-Far.