TO GO WITH AFP STORY BY CYRIL JULIEN Iranian women check make up at a cosmetics shop at Tehran's Grand Bazaar on May 10, 2014. Under the compulsory veil and despite hard times, Iranian women are unrestrained in showing off one feature on which they feel a need to spend money. Their faces. Everyday wearing of makeup is probably more common in Iran, an Islamic republic, than in some liberal western countries. It is a rare opportunity to parade one's beauty without fear of official censure. AFP PHOTO/ATTA KENARE (Photo credit should read ATTA KENARE/AFP/Getty Images)
Iranian women browse the goods on sale at a cosmetics shop at Tehran's Grand Bazaar

Hassan Rouhani likes to compare Iran’s galloping inflation rate to a wild horse, while reassuring long-suffering citizens that his government is making progress in taming the problem.

Since taking over as president last year, Mr Rouhani has staked his political reputation on ending crippling international sanctions over Iran’s nuclear programme and turning around the ailing economy after years of mismanagement by the previous government of Mahmoud Ahmadi-Nejad.

Reducing spiralling price rises has been a significant achievement. Inflation has been cut from 40 per cent when he took office to 21 per cent today.

“The government has tamed the runaway horse of inflation . . . There is no doubt the country has left behind the stagnation,” he told state television this month. Mr Rouhani has pledged to bring inflation below 20 per cent by the new fiscal year in March.

Iran’s economy also grew 4.6 per cent in the three months to August 22 compared with the same period of 2013, while the currency market has also been stabilised.

But on the streets of the capital, Tehran, many ordinary Iranians are unconvinced. The worry for Mr Rouhani’s government is that his economic improvements are not feeding through to the real economy.

“What the government says [about the economy] is total nonsense,” says Abouzar, who sells industrial tools at his shop close to the city’s Grand Bazaar. “I feel nothing positive in my business – my shelves are full and there are no customers to buy anything.”

Things look little better for Ashraf, a housewife in the poor Tehran neighbourhood of Sarasiab who says she struggles to afford even basic goods.

The cost of a litre of milk, Ashraf complains, has risen from 18,000 rials last year to 25,000 rials (about 94 cents), an increase of 28 per cent. A box of 24 eggs has jumped 24 per cent to 85,000 rials and a kilo of chicken is, at 67,000 rials, now 15 per cent more expensive. Official figures record that food prices have risen 6-12 per cent over the past year.

The price rises are affecting the amount of food being consumed. When Mr Ahmadi-Nejad came to office in 2005, Iranians ate about 200kg of food each per year. Per capita annual food consumption had dropped to 177kg by 2013.

“There is no difference between Rouhani and Ahmadi-Nejad,” Ashraf says. “He promised a lot but not only did prices not come down, they are going up.”

Mr Rouhani has acknowledged there is much work still to do, admitting in his television interview that the country was “still some way from prosperity”.

Iran’s economy contracted 5.8 per cent and 1.9 per cent respectively in the past two fiscal years, and analysts believe it could take many years for it recover.

Majid-Reza Hariri, deputy head of the Iran-China Chamber of Commerce, says conditions for ordinary Iranians and small business owners are “appalling”.

“When it is said the economy is improving that does not mean it has ascended any peak but it has been saved from falling into an abyss,” he says.

While Mr Hariri also hopes that the effects of the improving economy should be felt soon, others point out that the spread of growth has been uneven, and largely confined to areas such as the oil and automobile sectors, which have expanded 6.1 and 80 per cent respectively.

Significant parts of the economy, such as housing, have remained stagnant. There is also little sign that Iran’s cripplingly high unemployment rate, which stands at about 23 per cent for under-25s, will begin to fall any time soon.

Saeed Leylaz, a reform-minded analyst, remains upbeat, although he believes it will take until 2016 before the economy has returned to its 2011 level. “The economy has sunk 10 metres into the water. The government has managed to raise it 3 metres, but it still has 7 to go,” he says.

“The next 18-24 months are crucial,” he adds. “If the government cannot implement its economic policies efficiently and people’s patience wears thin, it could be weakened by the possibility of social unrest.”

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