Economy, Domestic Economy

Road to Sustainable Economic Growth

Road to Sustainable Economic GrowthRoad to Sustainable Economic Growth

Amid mounting hopes for economic prosperity following the removal of sanctions as part of the July 14 nuclear pact between Iran and six world powers, policymakers, economists and industrialists voice concerns about the recession overshadowing many domestic industrial and manufacturing sectors.

The government is focused on reviving the stagnant economy it inherited back in 2013, hoping that the unimpressive growth rates in the past few years will gain momentum.

Besides the imminent sanctions relief, the nuclear pact opened the gate for world businesses to interact with Iran’s economy, which is thirsty for international investment and trade cooperation, considering years of financial restrictions.

According to government spokesman, Mohammad Baqer Nobakht, the average inflation rate is expected to range between 10 and 11%, and the growth rate to stand at 4.1% in the next Iranian year (to start March 20, 2016).

Other officials, however, have taken a less ambitious stance.

“Should the current [economic] situation prevail, the growth rate is expected to reach 3% after the sanctions are lifted,” said the head of Central Bank of Iran, Valiollah Seif.

The Cabinet’s point man for economic policies, Minister of Economic Affairs and Finance Ali Tayyebnia, while refraining from dropping any specific digits, said the positive growth in certain industries over the past year will extend to small- and medium-sized enterprises next year.

The private sector’s representatives in the chambers of commerce, however, are more skeptical.

 “It would be unrealistic to think that the economy will signal any positive growth in the current year as a result of foreign delegations rushing to the country, considering sanctions-relief may not happen sooner than next spring,” says the head of Tehran Chamber of Commerce, Industries, Mines and Agriculture, Masoud Khansari.

“The most optimistic forecast would be a 0.5% growth rate in the current year,” he added, pointing out that since all the problems slowing down businesses are still in place, it would be wrong to foresee a bright future for the industries in the short run.

The same viewpoint has been echoed by another member of the chamber. Mehdi Pourqazi, TCCIMA’s head of Industries and Mining Commission, said given the recession in many economic sectors, growth rate in the current year is estimated to hover around zero.

Despite divergent opinions about the prospects of economic growth, what is agreed upon by economists is that a better future will emerge provided the government meets all the prerequisites for growth.

The government’s endeavors in reinforcing relations with the world in the past two years, while adopting effective macroeconomic policies leading to a considerable drop in inflation, indicate the determination of the administration of President Hassan Rouhani to resolve the issues facing the country with over the past years.

“There are three requirements that need to be met in order to reach economic growth,” says Masoud Nili, senior economic advisor to the president. “These requirements include macroeconomic stability, interaction with the outside world and competitiveness in the domestic market.”

These factors, according to Nili, would propel the economy toward sustainable and productive growth.

So far, he believes, the government has made considerable progress in the accomplishment of the first and the second prerequisites of growth, but has fallen short of meeting the third, which concerns domestic industries.

Nili said many domestic problems need to be tackled, such as freedom of doing business and the government’s interference with price mechanism and free market operations.

“Those issues, if resolved, would prepare the ground for achieving sustainable economic development,” he said.