President advisor foresees stronger economy
Masoud Nili, who was speaking in Iran’s IRIB Channel 1 Payesh (Persian for ‘survey’) yesterday, said that in economy, there were no magic and deadlock.
Nili commented on the government’s support package to find a way out of the inflationary recession. “The national incomes have declined 20 per cent in recent 2 years; when compared to market exchange rate, monetary base, and price index in 2005, they show rises as 3.5, 5.5, and 4.5 times, respectively, in 2013; while at the same period, the production increased only 20 per cent, and the number of employed people declined as well,” said Nili.
“When price rises, inflation rises, and with it, people’s purchasing power declines, destroying jobs. If for two consecutive seasons (each three months) the GDP is negative, this will mean a recession in economy,” added he. “Publicizing this recession is an indication of government’s acceptation of responsibility; since politicians generally like to depict the situation as good; however, if governments give false information to society, people either would not believe, which is not desirable; or they do believe, and plan according to perception of a good condition, which would be of devastating effects as well,” he said.
Nili pointed to negative growth rate in past years. “For example, between 1989 and beginning of 2014, our economy experienced recession, which in no time was it communicated officially to the public; the negative growth rate exceeded minus 9 per cent in some points in these years,” he added.
President’s economic advisor pointed to the lack of independence of Central Bank governance as the key factor of current economic conditions. “In financial sector, the system imposed a behavior economically flawed to banks, and the Central Bank’s control over money market declined, but demands for resources decreased; interest rates were suddenly decreased; this made unreturning projects more profitable and economically unfit to produce and return money to banks some years later; banks faced difficulties; on the other hand, the government expended the budget in an expansionary manner, which raised public expenditure and with it, the deficits in non-oil incomes, thus increasing dependence on oil income,” he said.
Nili maintained that the conditions thus created bring to dust all calculations made by entrepreneurs and investors. “The first backlash was that the bank did not receive back the resources provided for the investor, thus deviated from its natural function to other pursuits in order to make profit, since they would not produce profit, sought profit from rising inflation,” he said.
He criticized the current vogue in establishing numerous branches among the banks. “With information technology, we do not predict rises in the number of bank branches,” Nili added.
“There has been a fundamental change in modus operandi of the banks business, where the great shock was increased bank deferred returns and the other shock was that inflation led banks to embark on different businesses than their own business,” Nili complained.