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President Upbeat Over Economic Prospects

President Hassan RouhaniPresident Hassan Rouhani
Water, wastewater, environment and rail were the government’s top priorities in drawing up the budget for the upcoming fiscal year (starting March 21, 2017)

President Hassan Rouhani is “very optimistic” about the future of Iran's economy, backing up his optimism by citing a set of statistics in a televised interview on Sunday evening.

Referring to unemployment as the major problem facing the country, Rouhani said an average of 700,000 jobs was created annually in the past two years.

"There are only five countries in the world with the same performance," he was quoted as saying by President.ir.

But the pace of job growth was insufficient for the labor market, as both the number of unemployed and people looking for work have increased in recent years.

"The number of job seekers hit a record high of nearly 1.2 million this summer (June 21-Sept. 20, 2016). The total number of Iran's employed population stood at about 21.3 million in 2013 whereas the figure has reached 23 million today,” he said.

According to the latest figures released by the Statistical Center of Iran, the unemployment rate in the second quarter of the current Iranian year (June 21-September 20) stood at 10.9%.  The figure registers a 1.4% rise compared with the corresponding period of last year and a 0.1% rise compared with the first quarter (March 21-June 21).

> Economic Growth

The rise in oil and non-oil exports resulted in a 7.4% increase in gross domestic product in the first half of the current Iranian year (March 20-September 20, 2016), according to the Central Bank of Iran. This is while SCI has put H1 economic growth at 6.4%.

Rouhani said statistics by CBI and SCI on economic growth vary because they employ different methods of calculation such as different base years.

“Variations in their figures will be reduced by the yearend, as the two bodies have been asked to calculate economic indexes by employing the same base year,” he said.

According to the government spokesperson and head of Planning and Budget Organization, Mohammad Baqer Nobakht, Iran's overall economic growth in H1 stood at 6.5% by including the oil sector and 4.5% by excluding it.

“Construction sector has posted a negative growth of 10% in the same period whereas agriculture and industrial sectors have registered growths of 6% and 9%, respectively,” Nobakht was quoted as saying by IRNA.

President Rouhani believes the growth in the agriculture sector is tangible for farmers “as the government has purchased 11.5 million tons of wheat worth 150 trillion rials ($3.75 billion at market exchange rate) from local wheat growers”.

A ceremony was held last month to celebrate the bumper wheat harvest and self-sufficiency in wheat production, as over 14 million tons of wheat were produced during the eight months to November 20.

Meanwhile, Iran Mercantile Exchange offered 20,000 tons of durum wheat for exports for the first time on December 28.

Iran's economy emerged from recession two years ago with a 3% growth. The rebound followed two years of recession when the economy contracted 5.8% and 1.9% back to back. The Iranian economy grew 0.9% in the last fiscal year, according to SCI.

Rouhani also referred to Iran's increasing oil exports and said in January 2016, the country exported 1.1 million barrels of crude oil per day, but since the implementation of the Joint Comprehensive Plan of Action, Iran has managed to increase the exports to 2.2 million barrels a day. For oil and condensates, the figure stands at 2.7 million barrels a day.  

The International Monetary Fund forecasts that Iran's real GDP will grow by at least 4.5% in 2016-17. The World Bank has forecast 4.2% and 4.6% growth rates for Iran’s economy for 2016 and 2017 respectively.

"Non-oil exports fared much better in the first half of the year compared with the same period of last year," Rouhani said, adding that non-oil commodities worth $31 billion were exported during the nine months to December 20, registering a 10% rise over last year.

According to the Islamic Republic of Iran Customs Administration, gas condensate was the main exported commodity ($5.12 billion) during the nine-month period, making up for 16.22% of the export value. It was followed by liquefied natural gases ($1.95 billion or 6.18%), light crude oil, excluding gasoline ($1.23 billion or 3.89%), petroleum gases and liquefied hydrocarbons ($1.06 billion or 3.28%) and liquefied propane ($868 million or 2.75%).

“Both oil and non-oil exports flourished this year, which explains why I am upbeat about the outlook for Iran’s economy,” he said.

> Rial's Depreciation No More

Elsewhere in his interview, President Rouhani vowed that the national currency's depreciation against the US dollar will not continue.

The US dollar broke the 40,000-rial threshold in Tehran's market last month, recording an all-time high for the currency. The American currency began its rally in November.

The president announced as baseless claims that the government is manipulating the foreign exchange rate to boost its own revenues and said that in recent months the US dollar has surged in value against all currencies across the world.

“In fact, the exchange rates are in constant fluctuations, but they are bound to regain stability,” he said.

“Our efforts are directed toward sustaining the single-digit inflation rate for this year as well as next year.”

The Rouhani government prides itself in having lowered inflation below 10% for the rolling year ending June 20 for the first time in a quarter century.

> Boeing, Airbus Contracts

The president also referred to Iran Air's finalized aircraft deals with Boeing and Airbus as the fruits of the nuclear accord with world powers to end sanctions and said as per the contracts, the payments will be made over 18 years.

Iran Air signed a final contract in Tehran on December 11 to purchase 80 passenger jets from American plane manufacturer Boeing. The multibillion-dollar deal includes 50 of Boeing’s narrow-body 737max 8s, 15 wide-body 777-300ERs and 15 777-9s, which will be delivered to Iran Air over 10 years.

Later on December 22, Europe's Airbus signed a firm contract to sell 100 jets to Iran Air, including 46 of the narrow-body A320 family that includes the A321 model, 38 long-haul A330s and 16 of Europe's newest long-range model, the A350.

According to Iran's deputy roads and urban development minister, Asghar Fakhrieh-Kashan, the first Airbus order will be delivered in January.

“The Iranian people spend around $4 billion on buying tickets from foreign airlines on a yearly basis. Why shouldn’t local companies earn the trust of passengers and stem this outflow of currency?” Rouhani asked.

According to Fakhrieh-Kashan, Iran is prepared to fund the first $1 billion tranche for the planes in Airbus and Boeing contracts.

Half of this will come from foreign financing, primarily through a leasing company. The remaining half will be raised via various sources, including $330 million from Iran’s sovereign wealth fund called the National Development Fund of Iran and $120 million from a domestic sukuk issuance.

> Budget Priorities

Water, wastewater, environment and rail were the government's top priorities in drawing up the budget for the upcoming fiscal year (starting March 21, 2017), the president said.

Rouhani added that the government is working to allocate over 300 trillion rials ($7.4 billion) to civil development project by this yearend.

President Rouhani submitted the budget bill for the 2017-18 fiscal year to parliament on December 4.

The bill, which projects larger revenues from taxes and oil exports, amounts to 3,711 trillion rials, which puts it 10.6% over the 3,354-trillion-rial budget approved for the current year.

Also, government companies, banks and for-profit organizations, which had 6,828 trillion rials this year, will get 7,565 trillion rials to finance their operations.

The bill is currently under review by the parliament for final approval.

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