The International Monetary Fund expects Iran’s economy to grow 2.5% in 2021.
IMF’s new World Economic Outlook report titled “Recovery During a Pandemic” forecasts GDP growth to decline slightly to 2% in 2022 while its growth estimate for 2020 was 3.4%.
“The global recovery continues but the momentum has weakened, hobbled by the pandemic. Fueled by the highly transmissible Delta variant, the recorded global Covid-19 death toll has risen close to 5 million and health risks abound, holding back a full return to normalcy. Pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries. Overall, risks to economic prospects have increased and policy trade-offs have become more complex,” the report’s opening lines declare.
“Compared to our July forecast, the global growth projection for 2021 has been revised down marginally to 5.9% and is unchanged for 2022 at 4.9%. This modest headline revision, however, masks large downgrades for some countries. The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics,” it said.
“The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions. Partially offsetting these changes, projections for some commodity exporters have been upgraded on the back of rising commodity prices. Pandemic-related disruptions to contact-intensive sectors have caused the labor market recovery to significantly lag the output recovery in most countries.”
Dangerous Divergence
The latest IMF report noted that a dangerous divergence in economic prospects across countries remains a major concern.
“Aggregate output for the advanced economy group is expected to regain its pre-pandemic trend path in 2022 and exceed it by 0.9% in 2024. By contrast, aggregate output for the emerging market and developing economy group [excluding China] is expected to remain 5.5% below the pre-pandemic forecast in 2024, resulting in a larger setback to improvements in their living standards,” it said.
The report also expects the inflation rate in Iran to reach 39.3% in 2021 and drop to 27.5% in the following year.
IMF’s forecast for the unemployment rate in Iran is 10% in 2021 and 10.5% in 2022.
Furthermore, it expects the current account balance of the country to stand at 1.3% and 1% of GDP in 2021 and 2022 respectively.
The IMF report came shortly after the World Bank revised up its estimates and forecasts about Iran’s economic growth.
In a new report titled “Overconfident: How Economic and Health Fault Lines Left the Middle East and North Africa Ill-Prepared to Face Covid-19,” the bank has put its 2021 expectation for Iran’s GDP growth at 3.1%, which is 1% more than its previous forecast.
The revised-up 2022 forecast is now at 2.4% -- 0.2% more than previously expected.
According to the report’s MENA economic update for October, the Iranian economy grew by 3.4% in 2020. Previously, the World Bank said it grew by 1.7%.
Iran’s economy witnessed a 6% and 6.8% contraction in 2018 and 2019 respectively, the bank says.
Real GDP per capita growth is forecast to hit 1.8% and 1.2% in 2021 and 2022 after having experienced a 2.1% expansion in 2020 and 8% contraction in 2019, the report shows.
This is the second time the World Bank is revising its estimates and forecasts about Iran’s economy. The first time was back in June.
Domestic Reports
The Statistical Center of Iran says the economy registered a 7.6% year-on-year growth in the first quarter of the current fiscal year that started on March 21.
The industries and mines, and services grew by 13.8% and 4.5% respectively, but agriculture contracted by 4.5%, according to a new report posted on the SCI website.
The center noted that GDP growth, excluding the oil sector, stood at 4.6% in Q1 (spring).
The SCI report came shortly after the Central Bank of Iran reported that the Iranian economy grew by 6.2% in Q1.
According to a new report published on the bank’s website, except for the drought-hit agriculture with -0.9%, all economic sectors saw growth during the period (spring): oil with 23.3%, industries and mines with 2.1% and services with 7%.
Noting that services showed distinct signs of recovery after having been hit hard by Covid-19 pandemic in the first quarter of last year (registering a -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 3.6% growth, according to an earlier report.
Economic growth, excluding oil, expanded by 2.5%, it added.
According to SCI, last fiscal year’s GDP expanded by 0.7% compared with the year before.
Economic growth, excluding oil, saw an economic growth of near zero, SCI reported.
The center’s sectoral breakdown of growth rates shows that the agriculture, and industries and mines 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 mines, and services saw a respective contraction of 14.7% and 0.3%.
This is while the Central Bank of Iran put fiscal 2019-20 growth at -6.5%. Excluding the oil sector, growth was at 1.1%.
According to the bank, the oil sector shrank by 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%, while services contracted by 0.2%, in CBI’s account.
Iran's gross domestic product shrank by 4.9% in the fiscal 2018-19 compared to the year before, according to SCI, with production in industries and agriculture at -9.6% and -1.5% respectively while services showed 0.02% growth. The center put that year's growth, excluding oil production, at -2.4%.
The CBI did not release any report for 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%.
