A former economic adviser to Iran's central bank, Mehrdad Sepahvand, has challenged President Donald Trump's assertion that Iran's economy is nearing total collapse. Speaking on CNBC's Access Middle East, Sepahvand acknowledged ongoing economic difficulties but noted the situation is not as dire as suggested by Washington. He cited the presence of goods in stores and continued public confidence in the banking system as signs that Iran’s economy, while under significant strain, has not completely unraveled.

Iran’s economy has been contracting, with the World Bank estimating a 2.7% shrinkage in the year ending March due to economic turbulence from protests and escalating regional tensions. Inflation remains alarmingly high, with food prices soaring near 100%. The impact of the conflict and sanctions has also triggered significant job losses, with an official estimating one million Iranian jobs have been lost since the onset of these pressures.

The recent UAE decision to cut all trade and financial ties with Iran, a major trading partner, introduces a fresh challenge. Sepahvand highlighted that the UAE’s move will likely exacerbate Iran’s economic contraction, potentially pushing the nation’s GDP shrinkage to around 5% this year. The trade severance threatens to worsen inflation, inflate trade costs, and destabilize Iran’s currency over the coming quarters, adding to the hurdles imposed by Western sanctions.

Despite escalating U.S. pressure and the sanctions campaign dubbed Operation Economic Fury, Sepahvand warned that the political and economic tightening is bolstering hardline elements within Iran’s regime, complicating prospects for negotiation with the U.S. The brunt of the economic hardships is borne most acutely by low-income Iranians and the youth, who face rising prices and diminishing employment opportunities amid the ongoing conflict and isolation efforts.