Iran Construction Sector to Grow by 2.5 Percent in Real Terms in 2022

Iran's construction sector is expected to grow by 2.5% in real terms in 2022, following an annual growth of 1.8% in 2021. 
It is then expected to register an annual average growth of 3.6% during 2023-26, supported by government investments in the energy, oil and gas, petrochemicals, infrastructure and industrial sectors, according to ResearchAndMarkets.
The sector's output will be supported by government expenditure under the 2022 Budget announced in December 2021. The government released a budget of 36.3 quadrillion rials ($111.69 billion), projecting 9.3 quadrillion rials ($28.61 billion) in revenue and 13.9 quadrillion rials ($42.76 billion) in spending.
Of the total budget, the government allocated 20.1 trillion rials ($61.84 million) to the Ministry of Cultural Heritage, Tourism and Handicrafts, 158 trillion rials ($486.15 million) to the Education Ministry and 349.5 trillion rials ($1.07 billion) to defense infrastructure and strategic research, among others.
Over the remainder of the forecast period, the sector's output will be supported by the implementation of major projects, including the 300,000-barrel Shahid Qasem Soleimani Oil Refinery project with an investment of 483 trillion (rials $1.48 billion), the Khuzestan refinery with an investment of 189 trillion rials ($581.53 billion) and the development of Abadan refinery with an investment of 84 trillion rials ($258.46 million).
Additionally, an investment of 45 trillion rials ($138.46 million) over the next four years to develop 10 key motorways will improve the transportation network across the country. 
The country's talks with the Taliban to resume work on the Khaf-Herat link project, connecting northeastern Iran with northwestern Afghanistan, could help expand the rail network and improve trade relations between the two countries.
However, there are key political and economic risks that could impact investor confidence. On May 5, 2022, the government increased prices for essential food items, which has compounded financial challenges for households and led to protests in many parts of the country.

Construction PMI Bounces Back Above Threshold

Latest data released by Iran Chamber of Cooperatives on Purchasing Managers’ Index for the construction sector shows the index has bounced back above the threshold (50-mark).
The index settled at 51.11 in the fifth month of the current fiscal year (July 23-Aug. 22) up from 46.7 in the preceding month (June 22-July 22), indicating a 9.44% increase.
PMI is an indicator of the health of economic sectors and provides information about business conditions to decision-makers, analysts and purchasing managers. 
Raw material inventory, employment conditions, new orders, supplier deliveries and export/production conditions are among the criteria quizzed, yielding a final score of between 1 and 100. 
If a business scores 50, it means that no change has been perceived compared to the previous month, while scores higher or lower than 50 indicate that the business is expanding or contracting respectively. 
The survey includes 12 business criteria and any changes, whether it be improving, no changes or deteriorating. It is measured through a monthly survey sent to senior executives of 100 companies active in the real-estate sector. 
It is based on five major survey areas: "new orders" with a coefficient of 30%, "raw material inventory" (10%), "production" (25%), "supplier deliveries" (15%) and "employment" (20%).
The "new orders" sub-index stood at 51.66 in the month ending Aug. 22, indicating a 9.33% rise compared with 47.25 in the month ending July 22. 
The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased by 14.89% from 48.35 in the month ending July 22 to 55.55 in the month ending Aug. 22. 
The "raw materials (construction materials) inventory" sub-index grew by 13.15% from 43.2 in the month ending July 22 to 48.88 in the month ending Aug. 22.
The "employment" sub-index increased by 4.34% from 51.64 in the month ending July 22 to 53.88 in the month ending Aug. 22. 
To calculate housing PMI, seven secondary criteria were also surveyed by ICC, including "raw material purchase prices", which stood at 75.27 in the month ending July 22. The sub-index declined by 23.98% to stand at 57.22 in the month ending Aug. 22.  
"Warehouse Inventory" increased by 36.71% to reach 53.33 in the fifth Iranian month from 39.01 in the fourth month.
The "exports" sub-index settled at 50.55 in the month ending Aug. 22 from 50 in the month ending July 22, registering a 1.1% increase. 
"Prices of products and services" declined by 26.68% to stand at 52.77 in the month ending Aug. 22 from 52.77 in the previous month. 
"Fuel consumption" decreased by 6.97% from 54.94 in the fourth month of the current fiscal year to 51.11 in the fifth fiscal month.
"Sales" increased by 11.22% from 43.95 in the fourth fiscal month to 48.88 in the fifth month.
The sub-index of "performance expectations for the following month" settled at 57.22 in the month ending Aug. 22 from 54.39 in the previous month, showing a 5.2% increase.