The Ministry of Economic Affairs and Finance’s worst-case scenario forecast for Iran's average annual consumer inflation in the current fiscal year (March 2018-19) is at 27.8% and that of economic growth is at -2.5%.
The forecasts are based on an assessment of the country's economic climate and data provided by the Statistical Center of Iran.
According to the ministry’s predictions, annual inflation rate inthe current year (March 2018-19) would range between 24.4% and 27.8% and economic growth could vary from -1.1% to -2.5%.
Trends in Iran’s economic variables indicate that the rise in inflation rate, decline in economic growth and increase in unemployment rate would proceed in the coming months, Fars News Agency reported the Economy Ministry as saying.
The Statistical Center of Iran's latest report shows the goods and services Consumer Price Index in Iran saw a year-on-year increase of 42.3% in the Iranian month of Bahman (Jan. 21-Feb. 19, 2019) compared with the similar month of last year.
The overall CPI (using the Iranian year to March 2017 as the base year) stood at 158.1 in Bahman, indicating a 2.2% rise compared with the previous month.
The average CPI Index in the 12-month period ending Feb. 19 increased by 23.5% compared with last year’s corresponding period.
SCI had put the average annual inflation rate for the preceding month of Dey, which ended on Jan. 20 at 20.6%.
The index registered a year-on-year increase of 41.5% for urban areas and 46.7% for rural areas compared with the similar month of last year.
SCI put average 12-month inflation for urban and rural areas at 23.4% and 24.2% respectively.
The overall CPI reached 157.3 for urban households and 162.9 for rural households, indicating an increase of 2.1% for urban areas and 2.8% for rural areas compared with the previous month.
According to SCI's latest report, Iran's gross domestic product grew by only 0.4% during the first half of the current fiscal year (March 21-Oct. 22) compared with last year's corresponding period.
Excluding the share of oil sector from GDP, growth stood at 0.3%.
The breakdown of GDP for three economic sectors under SCI review shows only the services sector experienced growth with 2.3%. The two other sectors of agriculture and industry saw contractions of 2.5% and 1.2% respectively.
Latest World Bank projections show Iran's gross domestic product will continue to contract in 2019, before reversing gear in 2020.
According to WB's latest "Global Economic Prospects" report published after the New Year, Iran's GDP is bracing for a further contraction in 2019 to reach -3.6% after experiencing an estimated -1.5% in 2018 before stabilizing in the positive territory at 1.1% in 2020 and 2021.
The estimates for 2018, 2019 and 2020 show -5.6%, -7.7% and -3.1% changes compared to the World Bank's June 2018 projections.
The International Monetary Fund, in its latest World Economic Outlook, has said it expected Iran's economy to have contracted in 2018 and furthermore in 2019 as a result of the reimposition of US sanctions against the Islamic Republic.
"Prospects for 2018–19 were marked down sharply for Iran, reflecting the impact of the reinstatement of US sanctions," read the IMF report.
"The downward revisions reflect to an important extent the worsening of growth prospects for Iran, following the reimposition of US sanctions. The economy is now forecast to contract in 2018 (-1.5%) and in 2019 (-3.6%) on account of lower oil production, before returning to modest positive growth in 2020–23."
Ups and Downs
Iran's economy began to rebound after years of international sanctions following the signing of a deal between Tehran and world powers on the former nuclear energy program in 2015. The implementation of the deal, better known as the Joint Comprehensive Plan of Action, saw the lifting of economic sanctions against the Islamic Republic. In exchange, the country agreed to limit the scope of its nuclear program.
Yet last year, the United States, under the presidency of Donald Trump, decided to unilaterally pull out of JCPOA and reinstate the "toughest ever sanctions" against Tehran, as branded by Washington. This stifled much of the prospects facing the Iranian economy, as the US is putting it under enormous pressure.
Iran’s economy emerged from recession in the fiscal 2014-15 with a 3% growth after two years of recession when the economy contracted 5.8% and 1.9% back to back, the Central Bank of Iran said.
Growth in 2015-16 has been put at -1.6% by CBI and 0.9% by SCI.
CBI has put 2016-17 growth at 12.5% while SCI says it was much lower and near 8.3%.
The astronomical growth experienced in Iran after the removal of sanctions owed to a great extent to Iran's ability to increase its oil sales.
Later, however, as crude output ramped up and production capacity neared pre-sanctions levels, growth in the key sector slowed down.
With the US reimposing sanctions against Tehran and forcing other countries to stop importing oil from Iran, growth in this sector is expected to decline further.
A decline in oil production, the main driving force behind Iran's economic growth, will translate into a sharp fall in overall GDP growth.
