Domestic Economy

Economic Outlook for March 2015-16

Economic Outlook  for March 2015-16Economic Outlook  for March 2015-16

Where is Iran's economy headed in the upcoming year, which starts on March 21, in terms of inflation, economic growth and unemployment rate?

While government officials and economic experts have offered mixed over the past months, the majority are unanimous in predicting that the inflation is going to continue its downward trajectory, and could even reach single digits within the next two years, and that the economy will grow positively. This is while there has not been any official statement regarding the unemployment rate in the coming year, Eghtesadnews reported.

> Inflation Below 13-14%

President Hassan Rouhani estimated as part of his speech at the parliament back in December when he delivered the budget bill that the inflation rate would drop below 14 percent next year. The president's estimate was not far from that of Central Bank of Iran (CBI)'s deputy governor, Akbar Komijani, who the rate would reach 13-14 percent.

However, the above predications were made before the CBI's announcement that the inflation rate reached 15.2 percent in the 11th month of the current year – surpassing the government's promise to bring down inflation to 20 percent before the year's end. This led to some adjustment in official estimates.

Also, First Vice-President Es'haq Jahangiri, President's chief of staff Mohamamd Nahavandian, Economy Minister Ali Tayebnia and senior economic advisor to the president, Masoud Nili have been all in agreement that inflation will be down to a single digit in the Iranian year 1395 without suggesting a specific digit.

Meanwhile, the global economic forecasting institute, Business Monitor has predicted 22% inflation rate for Iran in 2015.

While government officials are expecting the inflation rate to fall in the upcoming year, latest statements by CBI officials suggest that the economic atmosphere for the next year is still clouded with uncertainties. CBI's deputy governor for economic affairs, Peyman Ghorbani recently said in an interview with Tasnim news agency that the fluctuations in inflation rate are "not predictable as it all depends, to a great extent, on the economic developments, the budget law and the economic policies in different sectors."

> Slow But Steady

Apart from inflation, which the government apparently succeeded to tame over the past one year, not much has been said about the other two macroeconomic indicators, except for the head of the Management and Planning Organization of Iran (MPO), Mohamamd Bagher Nobakht, when he estimated that the economy would experience at least 2.5% growth in the coming year.

However, what is suggested by most officials is that the economy is expected to grow albeit at a slower rate compared with the outgoing year. As the positive growth during the first half of the current year was largely contributed to by the growth in the oil sector, it is expected that the decline in oil prices is going to hamper growth in this sector.

Meanwhile, the World Bank's latest report has predicted 0.9 percent economic growth for Iran in 2015, whereas the institute's earlier reports had anticipated 2.2 percent growth. The International Monetary Fund (IMF) in its Economic Outlook Report for the Middle East and Central Asian Region has predicted 0.6 percent growth for Iran's economy in 2015, adjusted from its previous forecast of more than 2 percent growth. The Business Monitor, for its part, has predicted 1.4 percent economic growth for Iran in 2015 in its latest report, down from its previous forecast of 2.1 percent.

> Employment Rate Unclear

No official statement has been heard over the past months to predict next year's unemployment rate. However, what the officials were heard saying was warning about the growth in the number of job-seeking graduates, urging the government to take action towards creating jobs. Minister of Labor, Cooperative and Social Affairs, Ali Rabei has also been quoted as saying: "Every one percent growth in the economy could lead to the creation of 7,000 jobs," without elaborating on whether any jobs have actually been created or not.

Meanwhile, the IMF has predicted a 12.2 percent unemployment rate for Iran in 2015. The institute's prediction for unemployment rate in 2014 was 11.2 percent.