The Iranian economy grew 6.2% in the first quarter of the current fiscal year (started March 21) compared with the similar period of the previous year, says the Central Bank of Iran.
According to a new report published on the bank’s website, except for the drought-hit agriculture with -0.9%, all economic sectors registered growth during the period (spring): oil with 23.3%, industries and mining with 2.1%, and services with 7%.
Noting that services showed distinct signs of recovery after the Covid-19 pandemic hit the sector hard in the first quarter of last year (registering -2.5% growth), the report attributes the expansion mainly to the subsectors of “transportation and warehousing”, “health and social work”, “wholesale, retail and auto repair”, “information and communications”, and “professional, scientific and vocational”.
The report added that growth, excluding the oil sector, stood at 4.7% in Q1.
According to CBI, the economy also expanded in the fiscal 2020-21.
Iran’s gross domestic product in the last fiscal year (March 2020-21) saw a 3.6% growth, according to an earlier report.
Economic growth, excluding oil, expanded 2.5%, it added.
Boost in Oil Production
As in spring, the rise in oil production was the main driver of growth in the last Iranian year. The sector saw a whopping 11.2% expansion by generating 858.24 trillion rials ($3.57 billion), according to CBI.
Iran is determined to increase its oil export despite sanctions imposed by the United States on Tehran's crude sales, Iranian Oil Minister Javad Owji said recently, adding that the use of oil sanctions as a "political tool" would harm the market.
"There is a strong will in Iran to increase oil exports, despite the unjust and illegal US sanctions," Owji told state TV.
"I promise that good things will happen regarding Iran's oil sales in the coming months."
Oil exports, Iran’s main revenue source, have plunged under US sanctions, which were reimposed three years ago after Washington abandoned Tehran's 2015 nuclear deal with six powers.
Tehran does not disclose its crude export data, but assessments based on shipping and other sources suggest a fall from about 2.8 million barrels per day (bpd) in 2018 to as low as 200,000 bpd. One survey put exports at 600,000 bpd in June.
"Iran will return to its pre-sanctions crude production level as soon as US sanctions on Iran are lifted," Owji said.
"We are against using oil as a political tool that would harm the oil market."
Since April 9, Tehran and six world powers have been in talks to revive the nuclear pact. The sixth round of negotiations adjourned on June 20 and the next round of talks has yet to be scheduled.
Owji said Iran backed a decision made by the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, to stick to a policy from July of phasing out record output cuts by adding 400,000 barrels per day (bpd) a month to the market, Reuters reported.
The CBI’s sectoral breakdown of last fiscal year’s growth rates shows that the “agriculture” and “industries and mining” groups experienced a growth of 4.5% and 7.1% during last year. The services sector was the main laggard of economic growth during the period with 0.0% economic growth.
Construction, which is a subsector of “industries and mining” group, expanded by 7.7% to reach 311.87 trillion rials ($1.29 billion).
Statistical Center of Iran’s Report
The Statistical Center of Iran reported that in the last fiscal year, the country’s GDP expanded by 0.7% compared with the year before.
Economic growth, excluding oil, saw an economic growth of near zero, the SCI reported.
The center’s sectoral breakdown of growth rates shows that “agriculture” and “industries and mining” sectors experienced a respective growth of 3.5% and 4.2% during the period. The services sector contracted by 2% in the fiscal 2020-21.
Discrepancies were also seen in SCI and CBI reports on Iran's economic growth in the fiscal 2019-20.
According to SCI, the Iranian economy experienced a -7% contraction in the fiscal 2019-20.
According to the center, GDP shrank by -0.6% without taking oil production into account.
The sectors of "industries and mining" and "services" saw a respective contraction of 14.7% and 0.3%.
This is while the CBI put last fiscal year's growth at -6.5%. Excluding the oil sector, growth was at 1.1%. The oil sector shrank by a whopping 38.7%, amid sanctions on Iran's oil sales.
The sectors of “agriculture” and "industries and mining" saw a respective growth of 8.8% and 2.3%, as services contracted by 0.2%, he added.
Iran's gross domestic product shrank by 4.9% in the fiscal 2018-19 compared to the year before, according to SCI, with production of the two groups of "industries" and "agriculture" at -9.6% and -1.5% respectively and services at 0.02% growth. The center put that year's growth without taking oil production into account at -2.4%.
The CBI did not release any report on the fiscal 2018-19 economic growth.
Iran’s economy emerged from recession in the fiscal 2014-15 with a 3% growth after two years of recession when the economy contracted 5.8% and 1.9% back to back, according to the Central Bank of Iran.
Growth in 2015-16 has been put at -1.6% by CBI and 0.9% by SCI.
The CBI has put 2016-17 growth at 12.5% while SCI says it was much lower and near 8.3%.
World Bank Revises Up Estimates, Forecasts
The World Bank has revised up its estimates and forecasts for Iran’s economic growth in its latest Global Economic Prospects reports published in June.
According to the report, the economy is forecast to experience a 2.1% and 2.2% growth in 2021 and 2022 respectively.
The new forecasts have been revised up by 0.6 and 0.5a percentage points respectively.
The forecast for 2023 GDP growth is at 2.3% in the new report.
Moreover, the estimate for 2020 has been revised up to 1.7% from -3.7% in the previous report published in January.
According to the World Bank, Iran’s economy saw a 6% and 6.8% contraction in 2018 and 2019 respectively.
The report’s quarterly estimates put 2019 Q4, 2020 Q1, Q2, Q3 and Q4 growth rates at 1.8%, -6.8%, -2.9%, 4.9% and 3.4% respectively.
“Despite continued pandemic-related disruptions, rising oil prices and faster-than-expected recoveries in most regional economies, are supporting activity to 2.1% in 2021 and 2.2% in 2022 with a rebound in industrial production outweighing continued suppressed demand for services due to a high number of Covid-19 cases.”
IMF Estimates, Forecasts
The International Monetary Fund expects Iran’s economy to grow by 2.5% in 2021.
In its World Economic Outlook report titled “Managing Divergent Recoveries”, IMF has put Iran’s GDP growth in 2020 at 1.5%. Projection for 2022 is at 2.1%.
According to IMF, the country experienced a 13.4% growth in 2016, the year Iran’s nuclear deal with world powers, also known as Joint Comprehensive Plan of Action, was implemented, i.e. international sanctions against the Islamic Republic were lifted.
The massive growth was followed by a further 3.8% in 2017. But with the US withdrawal from JCPOA in 2018 and the introduction of new rounds of sanctions, the Iranian economy shrank by 6% and 6.8% in the following two years.
In its preface, the “Managing Divergent Recoveries” report refers to implications of Covid-19 for the world economy and says: “We are now projecting a stronger recovery in 2021 and 2022 for the global economy compared to our previous forecast, with growth projected to be 6% in 2021 and 4.4% in 2022. Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis.”
The IMF report noted that divergent recovery paths are likely to create significantly wider gaps in living standards between developing countries and others, compared to pre-pandemic expectations.
“Cumulative per capita income losses over 2020–22, compared to pre-pandemic projections, are equivalent to 20% of 2019 per capita GDP in emerging markets and developing economies [excluding China], while in advanced economies, the losses are expected to be relatively smaller, at 11%. This has reversed gains in poverty reduction, with an additional 95 million people expected to have entered the ranks of the extreme poor in 2020, and 80 million more undernourished than before,” it said.
Besides the pandemic, Iran’s economy was grappling with the US “maximum” pressure campaign, but the new government led by Joe Biden is looking to revive JCPOA.
The revival talks have been stalled as the government in Iran changed following the election of Ebrahim Raeisi as the new president.
Iran may hold talks on restoring the 2015 nuclear accord with world powers on the sidelines of the United Nations General Assembly next week, as the country looks to make further changes to its nuclear-negotiations team, Bloomberg reported.
Foreign Minister Hossein Amirabdollahian will leave for New York on Monday and will meet representatives of the nuclear deal member-states “if such meetings will be useful”, Saeed Khatibzadeh, a Foreign Ministry spokesman, told reporters at a press conference in Tehran on Sunday.
