The Purchasing Managers’ Index, known by its Farsi acronym Shamekh, for Iran’s overall economy tumbled to 31.39 for the 12th month of the last fiscal year (Feb. 20-March 19, 2020), indicating the biggest monthly drop since the index was first calculated by the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture in October 2019.
The overall PMI for the economy improved from 44.26 in the month leading to Jan. 20, to 47.62 in the month ending Feb. 19, but plummeted to 31.39 in the month ending March 19, as business activities in the country collapsed following the outbreak of the novel coronavirus.
The center says the numbers point to an economic contraction of 51.7% or 16.23 points month-on-month.
The headline PMI is a number from 0 to 100, such that over 50 shows an expansion of the economy when compared with the previous month. A PMI reading under 50 indicates contraction and a reading of 50 implies no change.
PMI is an index of the prevailing direction of economic trends, aiming to provide information about business conditions to company directors, analysts and purchasing managers.
According to the report, the “business output” sub-index increased from 42.65 in the 10th fiscal month (Dec. 22, 2019-Jan. 20, 2020) to 48.77 in the 11th fiscal month (Jan. 21-Feb. 19, 2020) but sank to 28.10 in the 12th fiscal month (Feb. 20-March 19, 2020)
The new orders sub-index improved from 40.41 in the 10th month to 46.33 in the 11th month, but fell to 28.60 in the 12th month.
The supplier deliveries sub-index, which measures how fast deliveries are made, increased from 50.67 in the 10th month to 50.35 in the 11th month, but dropped to 36.51 in the 12th month.
The raw materials inventory sub-index fell from 41.81 in the month ending Jan. 20 to 37.76 in the month ending Feb. 19 to 32.23 in the month ending March 19.
The PMI reading of employment sub-index climbed from 48.52 in the 10th month to 51.03 in the 11th month, but tumbled to 35.42 in the 12th month.
The numbers point to an economic contraction of 51.7% or 16.23 points month-on-month
To calculate PMI, seven secondary criteria were also surveyed by the center, namely raw material purchase prices, warehouse inventory, exports, product price, fuel consumption, sales and production expectations.
The raw material purchase prices sub-index increased from 74.79 in the month ending Jan. 20 to 84.05 in the month ending Feb. 19, but fell to 61.98 in the month ending March 19.
The warehouse inventory sub-index plunged from 45.88 in the month ending Jan. 20 to 42.55 in the month ending Dec. 21 to 36.30 in the month ending March 19.
The exports sub-index improved from 40.97 in the 10th month to 45.29 in the 11th month, but fell to 30.30 in the 12th month.
The prices of manufactured products or services sub-index increased from 54.66 in the 10th month to 63.13 in the 11th month, but slid to 44.98 in the 12th month.
The fuel consumption sub-index climbed from 60.59 in the month ending Jan. 20 to 66.92 in the month ending Feb. 19, but decreased to 35.37 in the month ending March 19.
The sales sub-index improved from 42.55 in the 10th month to 47.35 in the 11th month, but dipped to 29.17 in the month ending March 19.
The business output forecasts for the following month sub-index declined from 58.35 in the month ending Jan. 20 to 50.49 in the month leading to Feb. 19 to 23.82 in the month ending March 19.
Corona Costs and More
Estimates show 15% of Iran’s economy will be affected by the coronavirus outbreak, says Economy Minister Farhad Dejpasand.
The precise economic cost of the new coronavirus outbreak in Iran has yet to be determined, yet it is evident that the economy, already battered by years of punishing sanctions, is facing one of its toughest years in history.
“The country is bound to face a serious inflationary recession in the coming months, given the falling oil prices and the outbreak of coronavirus,” says Parviz Javid, a member of Iranian Economists Association.
“Due to the sanctions and complications associated with the country’s blacklisting by FATF, imports, particularly that of intermediate goods needed by factories, will also become more difficult. Nearly 60-70% of Iranian factories rely on imported raw materials. In case these raw materials are not supplied promptly and sufficiently, the factories will be forced to reduce their production capacity and lay off workers,” he told the Persian-language daily Shahrvand.
The Financial Action Task Force placed Iran on its blacklist on Feb. 21, after Tehran failed to comply with its anti-terrorism funding norms.
FATF had asked Iran to pass four bills as part of the “Action Plan” to escape the watchdog’s blacklist. Tehran managed to approve and enact amendments to counter-terrorist financing and anti-money laundering rules. Two remaining bills, namely Palermo (convention against transnational organized crime) and terrorist financing conventions (CFT) failed to get the approval of top legislative bodies.
As per the government plan dubbed Smart Distancing Initiative, low-risk businesses resumed activities on April 11 in all provinces, except Tehran that can follow suit on April 18. Government offices will be open from 7 a.m. to 2 p.m. The scheme allows one-third of employees in each workplace to undertake teleworking.
