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Why economic growth has not led to job creation in Iran

Low capital formation and productivity are holding back the Iranian economy.
TO GO WITH AFP STORY BY ARESU EQBALI  Iranian temporary manual workers wait for work in Tehran on March 11, 2008.  High inflation, unemployment, slack monetary policy and a lack of foreign investment: Iran is suffering from a litany of economic problems ahead of legislative elections on March 14. But despite windfall revenues from high oil prices, this has yet to be felt by millions of low and middle-earners who are finding their real incomes dwindling further due to inflation that has reached 17.8 percent.

Last fall, the World Bank forecast that Iran’s economy will grow by merely 4% and 3.4% in 2018 and 2019, respectively. These rates are much lower than what the Islamic Republic is seeking in its sixth five-year development plan (2016-2021) and 20-Year Vision (2005-25). As such, it seems that Iran is set to fail in implementing its strategic plans to achieve economic growth of 8%, including schemes that were deemed vital to boost productivity and job creation in the country.

Economic growth achieved by capital-rich industries rather than human capital is incapable of lowering unemployment. Having said that, the statistics published by relevant agencies in Iran concerning job creation do not correspond with the officially announced economic growth. This backs the argument that spikes in economic output have barely been sustainable and have clearly been driven by petrodollars in the case of Iran.

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