“Iran’s possible inflation rate drop doesn’t change the picture”

Posted on November 23, 2012

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It is possible that Iran’s current inflation rate will fall, yet it doesn’t really change the overall picture, Senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, James M. Dorsey believes.

Commenting on the possibility of Iran reducing its inflation rate next year, the expert said that it still is a clear signal the country is in desperate need for economic reform.

“Beyond the fact that this remains a very high inflation rate aggravated in impact by the sanctions, it signals the desperate need for economic reform and a way of easing international pressure,” Dorsey said.

Iran’s government has said that country’s current inflation rate is 24.9 percent, while the IMF (International Monetary Fund) has released a prognosis report that said the Islamic Republic would be able to reduce its inflation rate to 21.8 percent.

“With no resolution the nuclear controversy and lack of economic reform, Irans economy is certain to spira downwards,” Dorsey said. “Rising inflation is one indicator of that decline.”

The expert believes Iran’s economic crisis is the product of both international sanctions and misguided policy.

Recently, Iranian president Mahmoud Ahmadinejad met with members of Iran’s parliament, and promised to solve country’s economic problems prior to next presidential elections. He did not specify.

“In theory, Ahmadinejad could adjust his policies. He’s unlikely to do that in advance of an election if he is not a candidate himself,” Dorsey said.

According to Iranian constitution, Ahmadinejad is not able to participate in the elections for the third straight time. Next presidential elections in Iran will be held on June 14, 2013.

“Ahmadinejad is more likely to try and alleviate short-term economic pain with measures that worsen the situation longer term,” Dorsey noted.

The expert said that there are two things at stake in the forthcoming election for Ahmadinejad – one is his legacy as the president, and the other – his ability to push forward a candidate close to him.

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