The Central Bank of Iran says the economy grew by 4.1% in the first three quarters of the current fiscal year (March 21-Dec. 21, 2021) compared with the preceding year’s corresponding period.
According to CBI, the GDP growth stood at 3.4% without taking into account crude oil production during the period under review.
Oil saw the biggest growth of 11.7% among main economic sectors surveyed by the bank.
“Iranian oil production capacity can reach its maximum in less than two months after a nuclear deal is reached,” Oil Minister Javad Owji was quoted as saying recently.
Iran sits on the world’s fourth-largest oil reserves but its crude output has dropped since the imposition of US sanctions on its economy in 2018, when the US exited the 2015 nuclear deal.
"As soon as nuclear negotiations in Vienna are concluded, we can reach our maximum oil production capacity in less than one or two months," Owji was quoted as saying by the Oil Ministry’s news agency Shana on Telegram. "However, we are in no way tied to waiting for the nuclear talks."
Negotiations to revive the pact have been going on for 10 months in Vienna, Austria, and diplomats are now believed to be in the final stage of talks.
Iran pumped 2.4 million barrels per day on average in 2021 and plans to increase output to 3.8 million barrels per day, if sanctions are lifted, Reuters reported.
The CBI data further show the services sector expanded by 6.5%, industries and mines registered zero growth and agriculture contracted by 2.1%.
SCI Survey
The central bank report came shortly after the Statistical Center of Iran said the economy grew by 5.1% during the same period (Q1-3), adding that without taking into account the growth in oil sector, GDP grew by 3.8%.
According to SCI, agriculture contracted by 3.9%, industries and mines grew by 7.1% and services expanded by 5.1%. The subsectors of industries and mines, namely crude oil and natural gas extraction, other mines, industry, energy and construction registered a growth of 13.4%, -2.5%, 3.4%, 5.1% and 6.3%.
According to CBI, Iran’s gross domestic product in the last fiscal year (March 2020-21) saw 3.6% growth. Economic growth, excluding oil, expanded by 2.5%.
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.
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. This is while the CBI put the fiscal 2019-20 growth at -6.5%, which was 1.1%, excluding the oil sector.
Iran's gross domestic product shrank by 4.9% in the fiscal 2018-19 compared to the year before, according to SCI. 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 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.
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 Iran’s Growth Forecasts
The World Bank revised up in January its forecast on Iran's GDP growth in the new year. It is expecting Iran’s economy to grow by 2.4% in 2022, 0.2% more than the bank’s June 2021 projection.
"Growth in the Islamic Republic of Iran in 2022 has been revised marginally higher with tapering Covid-19 mobility restrictions benefiting the services sector and a gradual recovery in the oil sector,” the bank’s report said.
In Iran, the pandemic’s impact on the services sector was limited and oil production and industrial activity rebounded, minimizing the slowdown in economic growth.
According to the new World Bank Group flagship report “Global Economic Prospects”, the economy is estimated to have expanded 3.1% in 2021, 1% more than previously estimated.
Projections for 2023 say the GDP will grow 2.2%, 0.1% less than previously expected.
Iran’s economy is gradually recovering following a lost decade (2011–20) of negligible economic growth, reads the Iran Economic Monitor report, another publication of World Bank: “Adapting to the New Normal: A Protracted Pandemic and Ongoing Sanctions.” Below are excerpts from the executive summary of the report:
Less stringent Covid-19 restrictions, adaptation to the new normal— reflected in a recovery in consumption and more favorable oil sector conditions have driven a four-quarter rebound after June 2020, albeit from a low base. The rebound was boosted by the rapid rollout of Covid-19 vaccines in the second half of 2021-22.
However, limited accessible foreign exchange reserves, due to ongoing US sanctions, have led to exchange rate volatility and a surge in inflation. The economic rebound has also been predominantly jobless which, coupled with high inflation, has translated to declining household welfare, especially among the bottom income deciles who were also disproportionately impacted by the pandemic.
Meanwhile, adverse climate change events such as droughts and record temperatures have led to water shortages and energy blackouts that have brought the socioeconomic urgency of these challenges to the fore.
After exiting a two-year recession, Iran’s economy returned to some growth in 2021-22. The relaxation in cross-border trade, better oil market conditions and non-stringent Covid-related restrictions drove Iran’s economic rebound in the first quarter of 2021-22, which was driven by oil and services. The impact of the Covid-19 pandemic on gross domestic product (GDP) growth in 2020-21 was less pronounced compared to other countries due to less stringent Covid-19 restrictions, lower dependency on highly affected sectors such as tourism, oil recovery in the second half of 2020-21 and a relatively lower economic base after two consecutive years of economic contraction following the reimposition of US sanctions. Real GDP in 2020-21 was at the same level as a decade ago while the country forwent the demographic window of opportunity (a highly educated young population) along with a period of high oil prices (2010–14) and unemployment remained high at around 10%.
Iran’s economic outlook is affected by the Covid-19 pandemic and demand prospects from key export partners. Domestically, the initial slow response with regard to Covid-19 immunization in the face of the large Delta variant wave is expected to dampen `growth due to the scarring effects of the pandemic and lingering threat of future waves of infection. Stricter Covid-19 containment measures aimed at containing the spread alongside shortfalls in attracting new investment, due to negative real interest rates, will be additional headwinds to growth in the outlook.
Globally, slower growth in major trade partners such as China, together with ongoing US sanctions on exports, is also projected to weigh down on growth in both oil and non-oil sectors. As such, average GDP growth is projected to be modest, at under 3% per annum in the medium term.
Major risks to Iran’s economic outlook relate to the course of the pandemic and the prospects of geopolitical developments. The emergence of more infectious and deadly new variants of Covid-19 and subsequent containment measures would pose a significant risk to the recovery in Iran’s economy until the full vaccination of a large share of the population is achieved. Trade disruptions and weaker demand from neighboring countries such as Afghanistan and Iraq, the main source of accessible foreign exchange reserves, would also prove to be a major headwind for growth and financing imports.
The economy also remains vulnerable, albeit less than in the past, to future downturns in global oil prices. The mounting climate change challenges resulting in more severe water and energy shortages, together with high inflation, could further increase pressures on the most vulnerable and add to social grievances. Upside risks relate to the possibility of sanctions relief that could boost economic activity, as the economy has chronically operated below potential capacity.
IMF Forecast
The International Monetary Fund's World Economic Outlook report titled “Recovery During a Pandemic” forecasts the GDP growth to decline slightly to 2% in 2022.
“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,” reads the opening of the report.
“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. 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.”
The IMF report noted that the 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 concluded.
