Higher Unemployment and Economic Decline Looming
The Iranian Parliament’s Research Center has published startling new data on the state of the Iranian economy. In a survey of 98 manufacturing facilities across Iran taken between October 2011 to October 2012, production and employment have declined 40% and 36% respectively, while price of supplies and raw material have risen by 87% to 112%. The Business Environment Study Group of the Islamic Republic’s Parliamentary Research Center in a questionnaire sent to 98 economic institutions all across the country between October 3rd and October 6th, asked 7 questions to gauge the effects of sanctions, currency, raw materials, market fluctuations as well as other issues affecting production and investment. These economic institutions surveyed were those entities with facilities in several provinces across the country.
The survey has found that median production has been 42.5% of the capacity, employment 50.2% of capacity, change in production 40.3% as compared with last year, and employment rate of 36.5% lower than last year. The average increase in the cost of finished products and raw materials have been 87.9% and 112.1% respectively as compared with the end of March of 2012.
Fifty production and service facilities have started since March 2012, whereas 566 have closed down. Respondents have indicated that securing raw materials and equipment (high cost, price fluctuations, scarcity and limitations in imports), securing funds for necessary capital, securing needed currency (fluctuations and policy changes), difficulties stemming from direct sanctions, instability and shortcomings in planning and implementation of rules and regulations are some of the problems facing production.
Meanwhile, the executive secretary of the Labor Office in Isfahan, Asghar Barshan, predicted more unemployment in the current fiscal year ending March 2013. Borshan speaking with the Iranian Labor News Agency (ILNA) on the reasons exacerbating the crisis in the industrial sector said: “currency hikes, lack of currency in Rial, price hikes in raw materials, decrease in purchasing power of people and the recession are the main causes of chaos in the employment market. And the situation has been aggravated by the increased unemployment rate.”
Bashani added: “Some employers, thinking that difficulties are short lived and would be resolved in the near future, did wait for several months to cut their labor force. But now with the continued chaos and fluctuations they were forced to either shut down their facilities completely or decrease their work force considerably. Gradual lay-offs within the past 10 months, and economic fluctuations and currency hikes, unfortunately the rate of lay-offs in production facilities will increase daily and turned to a worrying trend in the whole society.”
Pointing to most contracts being temporary, Boshani believes that by the year’s end with the end of contract terms and the start of accounting period, the rate of furloughs will pick up. He added that with the aggravation of economic and financial difficulties, the crisis is even more vivid this year.