Iran’s economy faces a long road to recovery as fragility is tested | US-Israel War on Iran News

Tehran, Iran Three weeks after Iran and the United States signed a deal to extend their suspension, their relationship remains fragile.

Three tanks are hit in the Strait of Hormuz in the past two days, although Iran and the US are expected to resume mediation talks to end the conflict next week, after the funeral of the Supreme Leader of Iran Ayatollah Ali Khamenei.

US military on Wednesday he started a major airstrike in the southern provinces of Iran, which prompted the Islamic Revolutionary Guard Corps (IRGC) and Iran’s regular army to launch missiles and drones at US targets in Bahrain and Kuwait. The two groups accused each other of violating the agreement signed last month.

But even if a long-term resolution is reached and international sanctions on Iran are lifted, analysts say it will take time for the country’s economy to recover.

The economy has been crippled by years of mismanagement and corruption; tough Western and United Nations sanctions; and, more recently, the damage caused by the two annual wars with the US and Israel, deadly protests across the country in January, with the shutdown of the Internet.

When the numbers tell the story

The decline in purchasing power has left millions of people in poverty. Inflation has recently risen to its highest level since World War II, when allied forces occupied Iran, seizing the railways and food supply, leading to severe famine.

The latest report of the Statistical Center of Iran for Khordad, the third month of the Persian calendar that ended on June 21, showed an increase in the price of goods by 88.6 percent compared to the same month last year. Inflation increased by about 6 percent compared to the second month of this year.

The rise in food prices was ascend to heaven about 134 percent in Khordad compared to the same month a year ago, oil and fat increased by 278 percent, red meat and chicken more than 178 percent, and bread and wheat about 139 percent.

Unemployment is at 7.5 percent over the course of the calendar year, according to the latest report from the Census Bureau released at the end of June. But the labor force is only at 40 percent, meaning that many people of working age are working outside the labor force – including students, retirees, short-term workers, and the unemployed.

The job outlook is also bad, as wages are constantly decreasing, as 38 percent of the legally employed work more than 49 hours a week, and as youth unemployment is over 20 percent, the report reports.

The starting monthly payment is equivalent to only $95 using the open market of the US dollar in Tehran. The rate has risen to 1.75 million rials per greenback in recent days, not far from the all-time low of 1.9 million in May.

The damage – and the recovery process

Due to budget constraints, the only assistance the government can provide is a few dollars a month in the form of electronic coupons for the purchase of essential items.

The report of the end of June of the Central Bank of Iran for the previous year that ended on March 20 showed that the gross domestic product (GDP) for the year stood at minus 0.7 percent, and the production of fixed income, the primary indicator of production capacity and economic growth, was about 12 percent. Imports fell by 16.6 percent, as did exports by nearly 5 percent.

The damage from about 40 days of heavy bombardment During the war, the country’s longest internet shutdown in the world, as well as the US military’s blockade of southern Iran’s ports – the extent of which has not been disclosed to the public – has only increased Iran’s economic problems. The International Monetary Fund says that Iran’s real GDP will decrease by 6.1 percent in 2026.

However, Mahdi Ghodsi, an economist at the Vienna Institute for International Economic Studies, said that some of the lost jobs could be recovered if there is a definitive stop to military escalation, restoration of transport and communications, access to electricity and fuel, and access to the Internet and payment systems.

“In that case, short-term layoffs in jobs, retail, transport, construction and small businesses can be quickly resolved, as these are more affected by uncertainty and disruption than by energy,” he told Al Jazeera.

Long-term problems

But Ghodsi warned that part of the damage is likely to be permanent.

“Where industries have lost machinery, storage, imports, workers, operating costs, or access to energy, reopening is not a simple matter of going back to the past,” he said, adding that in some cases, full recovery can take years and requires a lot of money, including foreign investment.

Last week, leading satellite image maker Planet Labs restored access to images of nearly 800 sites across Iran affected during the war, after lifting restrictions it had imposed in response. US government request delay or stop entry.

Some Iranians on social media pointed to the extensive damage done to Iran Electronics Industries (SAIran), a state-owned defense company that specializes in optics, communications, semiconductors and medical devices, among others.

But along with many military-related facilities and assets, and nuclear weapons that have been built for years are now destroyed, Iran’s industrial capacity and civilian infrastructure were heavily targeted by US and Israeli warplanes during the war.

Oil and gas facilities, petrochemical and steel giants, power plants, as well as seaports, airports, roads, bridges and residential areas were severely damaged.

Work to rebuild and restore lost power has begun amid a reduction in military supplies in recent weeks, with some airports and factories resuming operations.

But a full recovery still seems a long way off and more damage still lies ahead. US President Donald Trump has repeatedly threatened to attack Iran power grid and infrastructure if the bridges if the war resumes.

Economist Ghodsi said the government’s budget deficit is one of the biggest problems, as the government has already faced difficulties in getting regular operating income and salaries, as well as responsibilities in the local and regional governments. “This economic weakness has been one of the causes of inflation, as the budget burden is transferred to banks and the central bank through monetary policy,” he said.

Household waste

Speaking at a government-organized event in Tehran last month, Iranian President Masoud Pezeshkian expressed concern about further international protests as public discontent grows.

“Our most important strength is our unity, and the unity of our people. What I fear is that we fail to serve the people properly and they are not satisfied with coming to the streets to protest. Then our power is falling,” he said.

Officials leading the talks with Washington have supported the project as a good way to provide better economic conditions for struggling Iranians.

But stalwarts within the establishment, who see Iran as having won a major victory against the elite military, continue to defiantly refuse to give up anything.

At Khamenei’s funeral in Tehran on Monday, Pezeshkian was photographed mingling with mourners. he wanted to avenge the blood to the slain leader and shouted “Death to the traitor” and “Death to the treasonous traitor”.