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Dim Economic Prospects As Islamic Republic Tries To Save Face On 40th Anniversary

People walk through the old grand bazaar where shops are closed after a protest, in Tehran, Iran, June 25, 2018.

Following nearly a year of economic crisis, ordinary Iranians and market watchers who follow trends to help businesses in their decision making have been asking some key questions about how to survive and prevent losses let alone making a profit in current conditions.

In spite of the ongoing insecurity and instability of Iranian markets, particularly after the reimposition of US sanctions, the Iranian government has been constantly trying to conceal the crisis or to test various tactics to confront it, though with very little if any success.

As the Islamic Republic is planning to celebrate its 40th anniversary in February, bringing about at least a semblance of stability in the market is a matter of prestige and saving face for the regime. This is what has been happening in the forex market, where the rial has recovered a big chunk of its losses against the major currencies.

Iranian merchants conduct their business at a carpet market in the old main bazaar in Tehran, Iran, July 23, 2018.
Iranian merchants conduct their business at a carpet market in the old main bazaar in Tehran, Iran, July 23, 2018.

The questions asked by individuals and businesses trying to make ends meet about the stability of the forex market, the stock exchange, consumer goods market, and the housing market can be summarized as: Shall we stay in this market? Is it going to get any better?

Forex Market

After nearly a year of devaluation of the Iranian currency and the constant rise of hard currencies, particularly US dollar, the rial has been rising since the beginning of December.

The question for those who want to buy or sell dollars, particularly those who converted their fast devaluating rials into dollars at extremely high rates is: "Where the decline in the price of dollar is headed? Will it further decline, or is it going up once again," asks economist and contributor to Radio Farda Mehrdad Seyed Asgari,.

He explains that those who have bought dollars when the rate of exchange was at its peak have so far lost 40 percent of their investment.

Seyed Asgari says, the government will do its best to stabilize the rate of exchange and will try to encourage those who keep dollars at home to sell them at the market. The government has been successful in lowering the rates although it has had little success in encouraging investors to sell their dollars.

According to Seyed Asgari, the downward trend for the dollar will convince those who make instant emotional decisions to sell their dollars, but in this market, the real winners are the ones who can wait longer before selling.

Exchange Rates displayed on Dec. 12 show the rial under the 100,000 mark, which is a huge jump compared with late September.
Exchange Rates displayed on Dec. 12 show the rial under the 100,000 mark, which is a huge jump compared with late September.


The same question is valid for the gold market. But the gold market is more fluid and less sensitive. Those who buy gold, usually plan for longer-term investment. Seyed Asgari reminds that the gold market follows the same upward and downward moves that take place in the foreign currency market.

Stock Exchange

The stock exchange has experienced a 18 percent decline while the rate of exchange was at its peak . Trends in the market are still not quite clear. According to the economic website Eghtesad Online, in recent days (mid-December) "there were further signs in the stock market that investors expect no early auspicious momentum as the rial also enjoys relative stability in the currency market." But the overall economic outlook and losses by exporters hit by U.S. sanctions do not bode well for Iranian stocks.

Consumer Goods

According to Seyed Asgari, the prices of consumer goods are on the rise and this trend will continue as long as the people cannot trust the government's ability to control the market.

However, he noted that the government shows contradicting behavior in various markets in order to protect the interests of well-connected groups.

He pointed out that the government's decision to increase prices for vehicles or the price of fuel is in contrast to its resolve to control some other parts of the market.


Seyed Asgari says that the cost of housing continues to go higher and higher in the market. Although some dealers talk about the possibility of a decline in housing prices and rents, there are no real indication for a downward move in this market.

The rise if real estate prices also is an indication that investors are looking for safe heavens, as they do not believe the Islamic Republic can deal with multiple economic crisis and they certainly cannot feel safe keeping their money in rials.