Domestic Economy

SMEs Can Help Economic Recovery

SMEs Can Help  Economic Recovery SMEs Can Help  Economic Recovery

The Central Bank of Iran reported last week that the economy expanded 4.6 percent in the first quarter of the current Iranian year (March 21-June 21). The CBI report shows that the country’s GDP increased to 480,491 billion rials in the three-month period from 459,252 billion rials from the same period last year. While the report indicates the relative success of the government in professionalization of the economic policy, some critics argue that the numbers should be analyzed more carefully when it comes to relating the GDP growth rate to inflation, industrial growth and next year’s budget.

With the recent developments in Iran’s foreign relations - following Rouhani’s second trip to the United Nations since taking office as president last year, and the new figures released by the CBI, it seems that the national economy is experiencing growth after two years of downturn. At the same time, new data indicates that the economy is still suffering from stagflation, and that the industrial sector, followed by oil and commerce, has been the main contributor to the GDP growth in spring, Chairman of Tehran Chamber of Commerce Yahya Al-e Es’Haq wrote Wednesday.  

As Al-e Es’Haq put it, a large share of the growth attained during the first quarter of this year has been attributed to big enterprises run by the government. This indicates that the Rouhani administration needs to pay special attention to the development of small and medium enterprises (SMEs), he suggested.

CBI data indicates that automakers and the domestic steel industry have recorded significant increases in production rates.

However, according to Al-e Es’Haq, it is small and medium industries that need support because “they can accelerate recovery in the long run, so the government should help them if it aims to stimulate industrial growth.”

Small industries need to receive finances depending on their role in creating jobs and improving the quality of public services, he said.

According to the CBI, the latest annual inflation rate for Iran has plummeted to 14 percent. “But the average rate of inflation has not yet dropped to satisfactory level, and there’s a long way to go to reach that level,” Al-e Es’Haq stated. Pointing to the consumer price index as a fair measure to assess changes to the inflation, he says the reported decrease has yet to be observed in the market.

Consumers’ cost of living depends on the prices of the many goods and services they consume and the share of each good or service in the household budget. “The government must figure something out to help reduce the prices so that people start to really feel the change.”

The government says it has tried its best to curb inflation as the major part of its monetary policy. Yet, the process has had economic consequences like deepening the current recession, as pointed out by Al-e Es’Haq.

“One quick fix, which can also have long-term effects, is to allocate more funding for small and medium enterprises.” This, he said, can help remedy the economic stagnation, and also avoid causing an unwanted rise in the inflation rate. Besides, such a balanced policy “will receive a wider public support than the one which merely focuses on controlling inflation.”

The veteran Iranian businessman then hailed the government’s decision to submit next year’s budget while, at the same time, a committee has been formed to draft the Sixth Economic Development Plan (2015-2021).

 “This sends a positive signal to the private sector by encouraging it to plan for the future, and not just for the next two or three years,” Al-e Es’Haq stated.