Considerable decline in economic growth in Iran in the recent years, and also significant increase in annual inflation rate especially inflation rate of more than 40 percent in 2012 indicates an unfavorable phenomenon in the economy called stagflation. In economics literature, it is a specific type of recession that particular policies should be presented to exit it. In fact, policies leading to increase or decrease inflation cannot be adopted in stagflation.

Negative dimensions of economic, cultural, social, political, and welfare of stagflation make government offer strategies for exiting from this inevitable economic phenomenon so that Iranian government has offered two stimulus packages for it: The first package is associated with exiting from recession in medium and long term (offered in 2014) emphasizing on creating economic stability, movement in pioneer economic sectors, and managing public expectations. The second package is associated with exiting from stagnation in short term focusing on stimulating demand particularly durable consumer’s goods, fixing financial straits, monetary easing, and economic funding.

One of the anti-recession policies in the first package is focusing on economic pioneer sectors with most relationship with other economic sectors in order to stimulate economic stimulation. Housing is one of the most important of these sectors that has great effect on urban economy. Households’ welfare, production, employment, and income generation of housing are the most important issues in this sector. According to the Central Bank and the Chamber of Commerce, Industries and Mines Tehran, regarding welfare 36.6, 32.9, and 34.1 of total GDP in 2011, 2012, and 2013 respectively was related to the costs of housing and energy. This figure was 44, 50.4, and 51.6 percent in Tehran. Only1.5 to 2 percent of these costs is for energy share. Considering production and employment, the share of housing, construction, and the services of residential units was 17.7, 16.1 and 18 percent of GDP excluding oil (at market prices) in 2011, 2012, and 2013 respectively according to the Statistics Center of Iran while about 15 percent of 33.6% of industry share in the country’s employment is for housing and its ancillary services.

On the other hand, since housing sector is related to more than 300 backward and forward industries, buying and selling required elements of house boost industry and business. House for low-income groups is another proposed issue in urban housing. Undoubtedly, housing boom with the help of anti-recession package would influence employment, production, household’s expense, and urban marginal informal settlements. Also, a lot of facilities have been considered in order to sell domestic automobiles for depletion of inventory for manufacturers and consequently preparing the ground for the activity of this industry in the second anti-recession package in 2015. Regarding this package, it seems that there was not a comprehensive look from the perspective of urban economy. Whereas nearly 70% of air pollution in cities is related to vehicles and public transport is used in the world in order to achieve urban sustainability, massive injection of automobiles that do not have desirable quality environmentally, it does not seem justified. It increases the problem of urban traffic congestion in metropolises particularly in Tehran. It is necessary environment and traffic effects to be considered.  One of the other policies in the second anti-recession package is supplying central bank funds in the interbank market in order to remove short-term financial straits of banks, decrease in required reserve ratio of commercial banks to 10%, bank capital increase of the foreign currency reserve account, selling the share of insurance companies and banks, budget and selling unproductive banks’ assets. These policies lead to banks for lend to equip bank resources for granting facilities to production and consumption sectors. One of the fields of urban management is attending urban management institutions in money market and bank network. Indeed, this leads bank-dependent increasing power to urban management institutions. It will be very useful and effective in creating urban economy boom.

Source: Donyaye Eqtesad newspaper

News Code: 3636