Iran can face businesses’ bankruptcy, higher level unemployment

Posted on August 11, 2012

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Iran can soon find itself facing closure and bankruptcy of manufacturing and agriculture businesses, EU economic advisor Mehrdad Emadi said.

The advisor was commenting on Iran’s move to implement the “economy of resistance”, as part of country’s strategy to tackle the international sanctions.

Emadi added that another downside of the “economy of resistance” that Iran is currently implementing, could be a very high level of unemployment in an economy that already experiencing 15-20 percent unemployment level.

“This can cause serious damage to the social fabric of the society with unpredictable ramifications,” Emadi noted.

Iran’s economy is under increasing pressure from the international sanctions targeted against its oil industry and Central Bank because of the country’s nuclear development programme.

“While one should not under estimate the resilience and creativity of Iranian engineers and technicians, it will be unrealistic to expect that the coming months will be anything less than rising inflation above and beyond what the economy has seen and growing shortage of many commodities including some essential goods,” Emadi said.

As part of the “economy of resistance” plan, Iran established a special headquarters from the members of Iran’s Iranian parliament, presidential administration and the juridical system that would deal with several vitally important issues.

Among the problems that have to be solved are: inflation, high prices of agricultural goods, low level of currency exchange for traveling abroad, country’s dependency on oil money, and possible discounts in local banks.

Emadi said the term itself – “economy of resistance” – clearly indicates a period during which the economy will experience shortages of various kinds, among which is shortage of foreign currency earning and some key commodities.

“For such plan to succeed, there should have been a measure that would have enabled to manufacturing and agriculture sectors to not only increase their output to replace imports but to do so with less reliance on the import of intermediary input services,” Emadi explained.

Yet the advisor believes it would be hard for Iranian economy to resist the sanctions in this manner.

“While in certain instances this has happened, across the economy we do not have sufficient evidence that these two sectors and the energy sector have been prepared for the level of self reliance and improved productivity,” he admitted.

“That clearly will not be enough to enable the economy to resist the rising pressure of sanctions and under investment,” he added.

Last month The U.S. and the EU severely ramped up their sanctions on Iran with the aim of strangling its oil-export dependent economy in a bid to force it to roll back its nuclear activities.

Inflation in Iran is officially put at 21 percent but estimated by outside analysts to be much higher. Bread, taxi and energy prices have all risen markedly.

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