The Iranian economy expanded in the last fiscal year (March 2020-21), latest data released by the Central Bank of Iran and the Statistical Center of Iran showed, though CBI reports GDP growth to be much higher than that announced by SCI.
Preliminary estimates by the Central Bank of Iran show, using constant prices of the year ending March 2012, Iran’s gross domestic product in the last fiscal year (March 2020-21) reached 6,358 trillion rials ($26.49 billion) compared with 6,137 trillion rials ($25.57 billion) in the year before, registering a 3.6% growth.
Economic growth, excluding oil, expanded by 2.5% to reach 5,500 trillion rials ($22.91 billion) during the period under review.
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).
Iran plans to swiftly restore its crude oil production to pre-sanctions levels of nearly 3.4 million barrels per day (bpd), a senior Iranian industry official said recently.
The country plans to restore almost 1 million bpd of oil production within a month of the US lifting the sanctions on Iranian oil.
Farrokh Alikhani, deputy director of production at the National Iranian Oil Company, told the Iranian Oil Ministry's news outlet, Shana, that Iran plans to return to its pre-sanctions production of 3.38 million bpd.
According to OPEC's secondary sources in its latest monthly report, Iran's crude oil production averaged 2.393 million bpd in April, up by 73,000 bpd from March.
"Precise planning has been done to restore oil production to the pre-sanctions levels in one-week, one-month and three-month intervals, and if the sanctions are lifted, most of the country's oil production will be revived within a month," Alikhani told Shana in an interview.
"Our plan is not limited to restoring previous production capacity and in the second step, we plan to increase oil production capacity even further."
Alikhani said the next production increase targets Iran's crude oil production capacity to rise over 4 million bpd.
Sectoral Growth Breakdown
The CBI’s sectoral breakdown of growth rates in the report shows that the “agriculture” and “industries and mining” groups experienced a respective growth of 4.5% and 7.1% during the last fiscal year.
The services sector was the main economic laggard during the period with 0.0% growth.
When constant prices are used, the agriculture sector generated 513.69 trillion rials ($2.14 billion), oil sector 858.24 trillion rials ($3.57 billion) and industries and mining sector yielded 1,739 trillion rials ($7.24 billion). The services sector generated 3,435 trillion rials ($14.31 billion).
Construction, which is a subsector of “industries and mining” group, expanded by 7.7% to reach 311.87 trillion rials ($1.29 billion).
Gross fixed capital formation experienced a 2.5% growth to hit 1,001 trillion rials ($4.17 billion) in the last fiscal year, when constant prices of the year ending March 2012 are used. It covered the two sectors of “construction” and “machinery”, which registered a 3.1% and 0.9% economic growth, respectively.
The private final consumption expenditures declined by 0.4% to stand at 2,497 trillion rials ($10.4 billion) and final consumption expenditures by government decreased by 2.3% to hover around 621.02 trillion rials ($2.58 billion).
Using constant prices, exports and imports of goods and services decreased by 5.4% and 29.2% over the period to stand at 1,184 trillion rials ($4.93 billion) and 205.17 trillion rials ($854 million), respectively, the central regulator said.
GDP in the fourth quarter of last year (Dec. 21, 2020-March 20), using constant prices of the year ending March 2012, reached 1,542 trillion rials ($6.42 billion), registering a 7.7% growth year-on-year. Q4 economic growth, excluding oil, expanded by 3.6% to reach 1,299 trillion rials ($5.41 billion).
A sectoral breakdown of growth rates in the report shows that the “agriculture”, “oil”, and “industries and mining” groups experienced a growth of 3.4%, 35.8% and 9.9% in Q4. Services sector, however, contracted by 0.2% during the three-month period.
When constant prices are used, the agriculture sector generated 16,771 billion rials ($69.87 million), oil sector 243.29 trillion rials ($1 billion), and industries and mining sector yielded 452.86 trillion rials ($1.8 billion). The services sector generated 875.36 trillion rials ($3.6 billion) in Q4.
Construction expanded by 22.4% to reach 78,287 billion rials ($326 million).
Gross fixed capital formation registered an 8.2% growth to hit 272.88 trillion rials ($1.13 billion) in Q4, when constant prices are used. It includes two sectors of “construction” and “machinery”, which registered a 10.6% and 3.5% economic growth, respectively.
The private final consumption expenditures increased by 2.8% to stand at 601.93 trillion rials ($2.5 billion), as final consumption expenditures by government declined by 11.5% to hover around 173.52 trillion rials ($723 million) in Q4.
Using constant prices, exports of goods and services rose 23.9% but imports fell 17.6% over the three-month period to stand at 353.45 trillion rials ($1.47 billion) and 63,221 billion rials ($263 million), respectively.
SCI has reported that gross domestic product (when constant prices of the year ending March 2012 are used) hit 7,079 trillion rials ($29.49 billion) in the last fiscal year (March 2020-21), indicating a 0.7% expansion compared with the year before.
Economic growth, excluding oil, saw an economic growth of near zero as GDP hit 6,118 trillion rials ($25.49 billion) during the period under review.
SCI’s sectoral breakdown of growth rates shows that the “agriculture”, and “industries and mining” sectors experienced a 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 the reports of SCI and CBI 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, adding that 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 Abdolnasser 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 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 the production of the two groups of "industry" and "agriculture" at -9.6% and -1.5% respectively while services registered 0.02% growth.
The center put that year's growth without taking oil production into account at -2.4%.
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 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.
CBI has put 2016-17 growth at 12.5% while SCI says it was much lower and near 8.3%.
World Bank Revises Up Appraisals
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 0.5 percentage points respectively.
The forecast for 2023 GDP growth is at 2.3% in the new report.
The estimate for 2020 has been revised up to 1.7% from -3.7% in the previous report published in January.
According to World Bank, Iran’s economy saw 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%.
“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,” it said.
The new revised up forecasts and estimates by World Bank come as indirect US-Iran talks on reviving the 2015 Iran nuclear deal are ongoing in Vienna, Austria.
The talks' chief coordinator, EU foreign policy official Enrique Mora, who is leading the shuttle diplomacy between Iran and the United States, has said he expects a deal in the latest round of talks that started on Saturday. Other envoys, however, are more cautious, saying many difficult issues are yet to be resolved.
"We are making progress but the negotiations are intense and a number of issues [remain], including on how steps are to be implemented," an EU spokesman said in a statement to reporters, adding that the aim was "to find ways to get very close to a final agreement in the coming days", Reuters reported.
Abbas Araqchi, the top Iranian negotiator, suggested it was unlikely the talks would conclude before Iran's presidential election on Friday.
Former US president, Donald Trump, abandoned JCPOA in 2018 and reimposed sanctions.
Trump's successor Joe Biden has said he wants to restore the deal's nuclear limits and if possible extend them to cover issues such as Iran's missile program. Iran wants all sanctions lifted and no expansion of the terms.
"Playing for time is in no one's interest," German Foreign Minister Heiko Maas, who is not at the talks, told Reuters, urging all sides to show flexibility and pragmatism.
China's top envoy said the main sticking point was US sanctions.
"Our message to them [the United States] is that they should stop shilly-shallying by moving decisively to sanction-lifting," China's ambassador to the UN nuclear watchdog, Wang Qun, told reporters.
On the steps Iran must take to return to compliance with the deal, Wang said, "To a great extent, the major issues have been worked out as a matter of principle, though I think there are some fixes (left)."
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”, the 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 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 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 has been grappling with the US “maximum” pressure campaign under the Trump administration. The new government led by Joe Biden is looking to revive JCPOA.
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