The International Monetary Fund expects Iran’s economy to grow by 2.5% in 2021.
In its new 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, formally known as the 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 walkout of the US from JCPOA under the administration of Donald Trump and 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 report noted that the 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 added.
Besides the pandemic, Iran’s economy has been grappling with the US “maximum” pressure campaign under the administration of former US president, Donald Trump. The new government led by Joe Biden is looking to revive JCPOA.
CBI-SCI Divergence
Preliminary estimates by the Central Bank of Iran show Iran’s gross domestic product in the first nine months of the last Iranian year (March 20, 2020), using constant prices of the year ending March 2012, registered a 2.2% year-on-year growth.
Economic growth, excluding oil, expanded by 1.9%, according to CBI.
The central bank’s sectoral breakdown of growth rates shows that the “agriculture”, “oil” and “industries and mining” groups experienced a respective growth rate of 4.6%, 3.9% and 6%.
The services sector was the main laggard of economic growth with a 0.3% contraction.
Construction, which is a subsector of “industries and mining” group, expanded by 3.6%.
The CBI report came after its governor announced that Iran’s economy came out of recession following two consecutive quarters of growth.
“The positive growth in the second quarter of the current fiscal year [June 21-Sept. 21, 2020] was re-experienced in the third quarter [Sept. 22-Dec. 20, 2020],” Abdolnasser Hemmati wrote in an Instagram post.
According to the CBI chief, Q2 saw Iran’s GDP rise 3.9% compared with the corresponding period of the year before.
“Without taking crude oil into account, the growth stood at 2.9%. I can confidently say that today Iran’s economy has weathered tough sanctions and the ensuing recession as it is repositioned on the path to growth,” he added.
Hemmati noted that the growth experienced by Iran’s economy is especially important, as the country has been grappling with the Covid-19 pandemic and maximum pressure from the US in recent years.
His account of GDP growth comes after the Statistical Center of Iran placed Q3 growth at 0.8%.
Growth, excluding oil, was at 0.2% during the three-month period, according to SCI.
Details of the center’s report show the “agriculture” sector saw a 5.5% expansion; “industries and mining” grew by 3.7% and “industries and mining sector, excluding oil” expanded by 3.1%. The “services” sector, however, contracted by 1.8% during the third quarter of the current year. “Construction”, which is a subsector of “industries and mining” group, expanded by 8.5%.
The SCI report also showed Iran’s gross domestic product contracted by 1.2% during the nine-month period leading to Dec. 20, 2020 (Q1-3) year-on-year.
Economic growth, excluding oil, saw a 1% decline, according to the center, which declared that the nine-month period saw the “agriculture”, “industries and mining”, and “industries and mining (excluding oil)” sectors experienced growth rates of 3%, 0.8% and 2.5% respectively. The services sector contracted by 3.3%. The construction subsector expanded by 3.9%.
The Statistical Center of Iran previously reported that Iran’s gross domestic product saw a contraction of 1.9% in H1 (March 20-Sept. 21). Economic growth, excluding oil, stood at -1.3%. Only the “agriculture” and “industries and mining, excluding oil” sectors experienced a growth rate of 1.7% and 2% respectively. The “industries and mining” contracted by 0.7% and “services” lowered by 3.5%.
SCI also reported economic growth in the second quarter of the current year (June 21-Sept. 21): Iran’s GDP expanded by 0.2% in Q2 while it shrank by 0.2% without considering the oil sector. The “agriculture” sector saw a 2.7% expansion; “industries and mining” 4% while “industries and mining sector, excluding oil” expanded by 4.2%. The “services” sector, however, contracted by 3% in Q2.
However, as the Central Bank of Iran reported economic growth, excluding oil, stood at 1.4% and when factoring in oil sector it increased by 1.3% in the first six months of last year compared with the same period of the year before.
“Economic growth, including oil, stood at -2.9% and 5.1% in the first and second quarters respectively,” Hemmati had said.
According to CBI, the “industries and mines” group registered the highest economic growth (when constant prices of the year ending March 2012 are used) in Q1 (March 20-Sept. 21) with 5.4%.
The services group contracted by 0.2% in H1 to post the sharpest decline among economic groups.
The CBI breakdown of H1 economic growth rates showed that the sectors of agriculture and oil expanded by 4.4% and 0.8% respectively. Within the “industries and mining” group, the mining subsector grew by 3.5%; “industry” by 6.7%; “electricity, natural gas and water” by 4.5% and “construction” by 4.1%.
Within the services group, the “commerce, restaurant, and hoteliering” subsector contracted by 0.3%; “transportation, warehousing, and communications” shrank by 0.6%; “services by monetary financial institutions” expanded by 11.9%; “professional real-estate services” grew by 1.1%; “general services” contracted 5.2%; and “social, personal and home services” shrank 10.2% in H1.
According to SCI, gross domestic product saw a contraction of 3.5% in Q1 (March 20-June 20, 2020) compared with the corresponding period of last year. Economic growth, excluding oil, stood at -1.7%. A sectoral breakdown of growth rates in the report shows only the agriculture sector experienced growth with a meager rate of 0.1%. The industries and services sectors contracted by 4.4% and 3.5% respectively.
The Central Bank of Iran came up with different numbers.
According to Hemmati, Iran's gross domestic product contracted by 2.8% in Q1 (March 20-June 20) year-on-year.
“A sectoral breakdown of growth rates shows the agriculture sector experienced 3.8% growth and the industries and mining sector expanded by 2.5%, but the services sector contracted by 1.6%, which was quite predictable following the outbreak of coronavirus and restrictions imposed to prevent the spread of the disease,” he wrote in an Instagram post.
Hemmati put Q1 economic growth, excluding oil, at -0.6%.
Iran’s economy is recovering from the pandemic shock. Compared with sanctions-free countries, which only had to deal with the coronavirus, Iran’s economic performance is promising, he added.
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 mines" and ""services" saw a respective contraction of 14.7% and 0.3%.
This is while the CBI governor put last fiscal year's growth at -6.5%. Excluding the oil sector, he put the growth at 1.1%.
According to Hemmati, the oil sector shrank by a whopping 38.7% amid sanctions on Iran's oil sales.
The sectors of agriculture and "industries and mines" saw respective growths 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 showing 0.02% growth. The center put that year's growth without oil at -2.4%.
The CBI did not release any report on the fiscal 2018-19 growth rate.
Iran’s economy emerged from recession in the fiscal 2014-15 with a 3% growth after two years of recession when the economy contracted by 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%.
