Rising inflation and economic instability in Iran are forcing households to cut essential spending, with experts warning of a significant increase in the number of people living in poverty.
Key facts
- •The IMF forecasts that Iran's economy will contract by 5.4% this year.
- •Inflation in Iran is expected to approach 69%.
- •More than 40 million people in Iran are now estimated to be living below the poverty line.
- •Food prices have risen significantly, with edible oils increasing by over 200%.
- •Many salaried workers and pensioners have fallen below the poverty line as incomes fail to keep pace with inflation.
Iran's economy is facing severe strain as the ongoing conflict exacerbates existing financial challenges, including high inflation and currency devaluation. Households are increasingly struggling to afford basic necessities like food and rent, while the private sector grapples with trade disruptions and market uncertainty.
By the numbers
Soaring Inflation and Cost of Living
Economist Ahmad Alavi notes that Iran entered the current conflict with significant economic vulnerabilities, including chronic budget deficits and high inflation. The war has acted as an external shock, with annual inflation reaching 66% and year-over-year figures nearing 88%. Food costs have seen particularly sharp increases, with edible oils rising by over 200%, bread and cereals by around 140%, and meat and poultry by 135%. These price hikes have forced many families to abandon savings plans and reduce spending on healthcare and education. Alavi estimates that between 3.5 and 4.5 million additional Iranians have fallen into poverty since the conflict intensified, bringing the total number of people living below the poverty line to more than 40 million.
Business Challenges and Trade Shifts
The private sector is struggling with the collapse of the rial and the difficulty of navigating regional trade routes. While China has increased its role in supplying goods via rail links through Central Asia to avoid maritime risks in the Strait of Hormuz, Iranian traders report that these shifts provide little relief. Merchants face constant uncertainty due to fluctuating exchange rates and the high cost of replacing inventory. Experts suggest that government interventions, such as subsidies and price controls, offer only short-term relief. Without addressing structural issues, reducing sanctions, and restoring confidence among investors and consumers, the economic outlook remains bleak, with further declines in living standards expected.
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This article was independently rewritten by ManyPress editorial AI from reporting originally published by Deutsche Welle Business.
