The Vicious Cycle of Inflation and Recession

Rising inflation has, on one hand, limited the purchasing power of households and, on the other hand, has intensified the recession of businesses due to increased production costs and weakened demand. According to data from the Statistical Center of Iran, the year-on-year inflation rate for food items reached 121.8% in September 2026. In this situation, nearly 78% of the minimum wage for a four-person household is spent on purchasing food. The one-million-toman food voucher only covers 17% of this household's food expenses; this share increases to 26% with an increase in the voucher to one million and five hundred thousand tomans. At the same time, statistics from the Central Bank's research arm indicate an 8% decline in industrial and mining activity in the three months ending in July 2026 compared to the same period last year. Rising input costs, energy constraints, liquidity shortages, and weak demand have reduced the production capacity of businesses. In such circumstances, without sustainable control of inflation, livelihood support will gradually become ineffective, and the continuation of the recession will exacerbate the risk of reduced production and increased unemployment.