Intertemporal substitution in Iran, sanctions edition

A good rule of thumb is that if a policy is going to happen, it is better to have that policy sooner rather than later.  Here is the latest from the land of fesenjan:

With hopes high that Tehran’s nuclear accord with world powers could lead to the lifting of international sanctions, consumers are holding back on spending in the expectation of price drops and the arrival of better quality imported goods. The motor industry has been badly hit, with sales of domestically produced cars dropping by 15 per cent over the past five months, according to official figures.

Officials warn the carmakers’ crisis is having knock-on effects across the economy, hitting sectors from parts-makers to the critical steel industry, the second-biggest non-oil sector, which is already struggling amid a housing slowdown.


The centrist government of President Hassan Rouhani has managed to cut inflation from about 40 per cent to 12.6 per cent over the past two years and end three successive years of economic contraction, with growth of 3 per cent in the year to March. But economists believe the economy has now stopped growing and may even be contracting.

Of course some of that is an oil price effect.  The full FT story by Najmeh Bozorgmehr is here.


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