It was bad before. Inflation in Iran was clocking in at 28.3% annually. But the inflation was somewhat offset by an Iranian economy swimming in petro dollars, particularly when oil was up at $140/barrel.
With oil hovering now having fallen to around $40/barrel, it's expected the s**t will hit the fan in three or four months in Iran. From McClatchy:
Foreign
imports will be throttled, incomes will drop, Iran's currency will
weaken and inflation will grow even worse. Iranian President Mahmoud
Ahmadinejad's populist spending programs, which have bloated the
government budget but bolstered his popularity with poor Iranians,
could sputter to a halt.
"We
will face social unhappiness," (Mehdi Fakheri, the vice president of
international affairs at Iran's Chamber of Commerce) said, and if the
global crisis persists and oil prices stay low, "maybe social unrest."
Iran's
dependence on oil money is staggering. Oil funds 60 percent of the
government budget, economists say, supporting billions in public
subsidies of goods such as gasoline, sugar and bread. A research center
affiliated with Iran's parliament reported this week that the
government depends on oil at $80 a barrel to keep its accounts balanced.
Iran's
oil income has dropped from $300 million to $100 million a day, and if
oil prices stay in the $30-$40 a barrel range, the country could see
more than $70 billion in expected funds evaporate — and with it a
significant chunk of Iran's gross domestic product, economists say.
President Mahmoud Ahmadinejad takes most of the heat for the lousy economy in Iran and it's likely to get worse for him as the infastructure projects he's promoted are cut due to lack of funding. It's also likely the hardest hit segment of Iranians will be the poor who have been the most loyal supporters of Ahmadinejad.
Presidential elections in Iran are scheduled for June 12, 2009. They couldn't come at a better time.
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