Economy, Domestic Economy

Foreign Trade to Reach $100b by March

Foreign Trade to Reach $100b by March
Foreign Trade to Reach $100b by March

President Hassan Rouhani says he will try his best to fulfill his campaign promises with the help of the private sector and the public.

“We need everyone’s help to achieve our economic objectives,” Rouhani said in a televised interview on Monday night. Many people feel that tensions with the West have eased as a result of last November’s interim nuclear deal, he said. “But we should all keep in mind that nuclear talks are only one part of our foreign policy. What’s certain is that we will not regress.”

The government’s main goal is to achieve a 3 percent economic growth by the end of this year (March 20), Rouhani added. “Our target is a 6-percent economic growth by the end of next year (March 2016),” he said.

Official figures released in the past few months showed that the economy has exited recession, with oil industry being the first sector to record a positive growth.

Asked about foreign trade situation, the Iranian president said that the total trade will “hopefully” reach about 100 billion dollars by the end of this year.

Foreign trade hit nearly $49.7 billion in the first six months of the current Iranian year (March 21-September 22), based on the latest report released by Iran Customs Administration. As the compiled data portrays, $23.66 billion of various types of goods were exported and $26.21 billion were imported in the first half of this year.

The report documented 22.5 percent rise in non-oil exports and 29.54 percent increase in non-oil imports. The new data indicates a steady growth in exports in the period, while showing a 13 percent rise in prices of each ton of the exported goods, compared to the same period last year.

On the issue of cash flow shortfalls, Rouhani said that enough liquidity has been injected first into the capital market and then to the banking system. “In the first five months of the year, the number of loans provided by the banks has increased more than 40 percent compared to the same period last year, most of which being low-interest working capital loans granted to businesses.”

 Controlling Inflation

Since taking office last year, the Rouhani administration has been facing economic stagnation and a runaway inflation. “Iran had never experienced an inflation of over 40 percent since 1979,” Rouhani said, adding that the point-to-point inflation has now reached 14.4 percent, which means “inflation has dropped by 31 points year-on-year – an unprecedented fall of inflation rate in the history of Iran’s economy.”    

Rouhani then predicted that inflation would fall below 20 percent by the end of the current Iranian year (March 20, 2015).

“I had first pledged to cut the inflation to less than 25 percent and now I say that I believe the number will fall below 20 percent by the end of the year,” he vowed.

“The average monthly rise in inflation rate reached around 3 percent during the last year of the previous administration. Currently, the number stands at almost one percent,” the president stated.

The CBI is targeting an inflation rate of 17 percent this year and 14 percent in 2015. By 2016, the bank hopes price growth will fall to the single-digit range, said CBI governor Valiollah Seif. The International Monetary Fund, based on its own estimates, expects Iranian inflation to average 23 percent this year and 22 percent in 2015.

When ex-President Mahmoud Ahmadinejad took office in 2005, inflation was about 10.4 percent, but in mid-2013, when Ahmadinejad handed over the office to Rouhani, the number had surged to 37.5 percent.

 Agriculture & Industry  

Elsewhere in his remarks, Rouhani said that the agriculture sector recorded a 3.3 percent growth in the first quarter of this year (March 21-June 22).

The president mentioned the current water crisis in the country and said different solutions are being considered to cope with the problem, including modernization of irrigation system in the agriculture sector.

He said that 57,000 billion rials will be allocated to the manufacturing sector of which 50% has been earmarked in the first half of the current year and the remaining will be paid gradually until the end of the year.

He added that the government aims to complete semi-finished projects this year, adding that 246 major projects are expected to be completed by the year’s end.  

 Subsidy Reform Plan

Asked if the government aims to continue with the second phase of the subsidy reform plan, Rouhani said the amount of payouts may be reduced to be used in sectors that need more financing.

The government has yet to come up with a solution to cut subsidy payouts for the rich families and, therefore, will continue allocating the handouts proportionally to all applicants, first vice-president Es’haq Jahangiri said Monday.  

The Rouhani administration seeks to amend the subsidy reform plan -- which it inherited from the government of former president Mahmoud Ahmadinejad. The plan includes cuts in subsidies for various commodities. Many experts believed that these unsustainable subsidies encouraged waste among goods, including in the production sector, ranging from gasoline to bread, suggesting that the traditional subsidization program must be stopped and that the only way to do that was to redirect subsidies.

 Sanctions and Growth

The country exited recession “before reaching a comprehensive nuclear deal and the removal of sanctions,” Rouhani added. This, however, “does not mean that an economic boom has occurred already”, Rouhani added.

On Saturday, the CBI governor said in Washington that Iran’s economy should continue to grow even if the US-led sanctions remain in place.

The economy is projected to grow by 3 percent this year, Valiollah Seif said in an interview in Washington, adding that the economic situation is already on the mend.

The P5+1 group of major world powers are negotiating a ‘permanent’ deal that would see Iran curb its nuclear program in exchange for looser economic sanctions. A senior member of Iran’s negotiating team said on Sunday that talks may be extended again if the agreement is not reached on the November 24 deadline.

 “Our current economic policy is based on the fact that the sanctions will remain in place, so this is a given assumption,” Seif said. “Obviously, if sanctions are removed, we would experience much better results.”

In its recent World Economic Outlook, the International Monetary Fund projected that Iran’s economy would grow 1.5 percent this year, followed by a 2.3 percent growth in 2015.

Meanwhile, a September report from the London-based Economist Intelligence Unit (EIU) forecast Iran’s gross domestic product (GDP) at 1.7% in fiscal year 2014/15 (March 21-March 20th, saying that growth will be weak but it could rebound “much faster” if Western sanctions against Tehran are lifted in the next few months.

The British publisher of information on business developments and economic trends said it forecast “the economy will recover slightly during the remainder of the forecast period, growing by an average of around 2.3%”, with oil export volumes edging up.

Such levels of GDP growth are substantially below the country’s historical trend and potential, the report said, “given the country’s hydrocarbons wealth and economic diversity.”