Iran's gross domestc product during the first quarter of the current fiscal year (March 20-June 20) grew 4.4% compared to last year's corresponding period, President Hassan Rouhani announced on Sunday.
"This administration started off its tenure after the economy had experienced a 6.8% contraction. Today, a 4.4% growth has been registered for the first three months of the current year," the president told a public rally in Kohgiluyeh-Boyer Ahmad Province in the southwest, IRNA reported.
The economy emerged from recession two years ago with a 3% growth. The rebound in economic output followed two years of recession when the economy contracted 5.8% and 1.9% back to back.
According to the Statistical Center of Iran, the economy grew 0.9% in the last fiscal year (ended in March). Agriculture helped Iran from falling back into recession with a 5.4% rise in output. The services sector stalled, as it edged up in output by 0.2% compared to a year before. Services, however, were far better than industries. The industrial sector contracted 2.2% during the year, as weak consumer spending and lack of adequate financing ate away at output.
"We are inching towards a 5% economic growth despite the fact that our enemies have manipulated oil prices to reduce to a third or a fourth is a testament to the Iranian people's trust in the government," Rouhani told his supporters in Yasuj, the provincial capital.
He added that 7,500 enterprises will come on stream by next March.
5% Growth by Yearend
The president's remarks come a day after the economy minister reiterated that a 5% economic growth will achieved before the Iranian year is out in March 2017, noting that increase in oil production and export will be the main driver of the growth.
“I believe that sustainable growth must be built on economic sectors other than oil,” ISNA quoted him as saying.
The growth forecasts by Iranian officials for the current fiscal year are slightly above World Bank's 4.2 % and 4.6 % estimates for 2016 and 2017 respectively.
"On the production side, growth will be mainly driven by higher hydrocarbon production. On the expenditure side, consumption, investment and exports are expected to be the main drivers," reads a report on Iran's economic outlook on World Bank's website.
The International Monetary Fund sees a 4-4.5% GDP growth over the medium term.
“Implementation of the JCPOA bodes well for the outlook. Higher oil exports, along with lower costs of trade and financial transactions, as Iranian banks reconnect to the international financial system, should help support the economy, with real GDP growth projected at 4-4.5% over the medium term," said IMF's First Deputy Managing Director, David Lipton in a statement after visiting Iran in May.
JCPOA or the Joint Comprehensive Plan of Action refers to the nuclear deal Iran signed with world powers last year. It came into effect on in January and marks the removal of years of sanctions imposed on Iran over its nuclear energy program.
Foreign investment is central to economic growth. According to Rouhani, the country needs up to $50 billion in foreign investments each year to achieve an ambitious growth rate of 8% by the end of the next economic development plan (2021).
However, experts question the likelihood of achieving such ambitious growth targets. The initial hype of sanctions relief has given way to skepticism and disappointment over what was expected. Banks have yet to reconnect with international lenders, as the latter still avoid Iran for fear of falling foul of the residual US restrictions.
Front and center is the debt crisis in the banking system, which the government is trying to contain. The ensuing shortage of liquid assets has hiked borrowing costs and suppressed lending. Its effects have overshadowed enthusiasm about the economic turnaround anticipated from the easing of the international sanctions.
Low productivity and low consumer spending due to declining purchasing power is further tightening the screws on the industrial sector, which has been left without a strong domestic or foreign market.
Foreign Delegations Inflow
Elsewhere during his remarks on Sunday, Rouhani referred to the visits of international delegations to Iran after the nuclear deal.
"In less than a year, some 350 economic delegations as well as 160 political missions visited Iran from across the world," he noted, adding that 82 memorandums of understanding have been signed with thee visitors for investment in Iran, of which 29 have come into effect.
Government spokesman Mohammad Baqer Nobakht says 66 foreign direct investment projects worth $5.16 billion are being implemented after the nuclear deal in January, adding that the FDI projects are mostly in transportation, renewable energy, tourism, recycling, electronic industries, food and machinery.
Nobakht says Iran managed to attract $6.71 billion for 63 FDI projects in the present fiscal Iranian year and that in the previous year FDI was a meager $920 million for 41 projects.
According to a member of the board of directors of the Iran Chamber of Commerce, Industries, Mines and Agriculture Hossein Pir-Moazzen, the number of visiting foreign delegations last Iranian year equals the total number that arrived in the past 25 years. “We are seeing Iran strengthening trade ties with other countries, thanks to the nuclear deal,” he was quoted as saying.
Chinese President Xi Jinping was the first world leader to visit Iran after the implementation of the nuclear deal in January. During the visit, Tehran and Beijing set the target of pushing bilateral trade to $600 billion in the next 10 years—almost 10 times the current figure.
Other world leaders to visit Tehran in the post-JCPOA era were former Turkish prime minister, Ahmet Davutoglu, Swiss President Johann Schneider-Ammann, President of Vietnam Truong Tan Sang, Italian Prime Minister Matteo Renzi and South African President Jacob Zuma, all of whom led large business delegations.
High-profile visits were also made by President of Austria Heinz Fischer and Russian President Vladimir Putin in September and November respectively. Leaders of Turkmenistan, Azerbaijan, Greece, Ghana and Iraq have also visited.
Germany, Italy, France, Denmark, Slovakia, Brazil, Thailand, Britain, Japan, China, Lebanon, Oman, Turkey, Serbia, Venezuela, South Africa, Kazakhstan, India, Russia, the Netherlands, Indonesia, South Korea, Poland, Thailand, Czech Republic, Pakistan, Switzerland, Hungary, Tunisia, Belgium, Bangladesh, Sri Lanka, Sweden, Croatia, Kenya, Guinea, Lithuania, Malaysia, New Zealand, Niger, Norway, Armenia, Afghanistan, Algeria, Ukraine, Uganda and Spain have also sent ministers, top officials and business delegations to Tehran.
Single-Digit Inflation
President Rouhani also referred to the fall in inflation to a single digit after a quarter century. Headline inflation fell below 10% for the rolling year ending June 20.
Reducing inflation has been a primary goal of the government whose efforts are paying off. The last time was in 1990, when Iran was emerging from the carnage of the 1980-88 Iraq-imposed war.
Urban consumer price index fell to 9.5% for the rolling year ending June 20 for the first time in 25 years. Inflation in the rural regions fell below the 10% mark.
Data on inflation released by the SCI shows the goods and services Consumer Price Index for urban areas increased 9% in the 12-month period ending July 21, which marks the end of the Iranian month of Tir, compared with last year’s corresponding period. The overall consumer price index (using 2011 as the base year) stood at 227.8 in Tir, indicating a a 1.6% increase compared with the previous month and a year-on-year increase of 6.5% compared with the same month last year.
