A recent report by the Central Bank of Iran (CBI) has reviewed the main developments in the economy over the past Iranian year, which ended March 20, 2014.
According to the report, Iran registered recession in the first half of the year but in the second half, the economy was relatively stable showing signs of recovery.
The change in tone and approach of the Rouhani administration in its international interaction and the resultant interim nuclear agreement in November 2013 strengthened hopes for peace and moderation and altered expectations, the report said. As a result, stability was restored to asset and foreign exchange markets and the procedure to finance the controversial Mehr housing scheme was revised, which in turn paved the way for gradual recovery.
In 2013-14, the CBI adopted scientific approaches to draw up monetary, credit, supervisory and foreign currency policies and manage market behavior and indicators, while observing the principles of macroeconomic sustainability. The bank’s commitment to utilize professional views helped it to promote financial discipline, maintain relative stability in foreign exchange market, optimize the use of foreign currency resources, direct banking facilities towards empty economic capacities, increase the share of working capital credits, facilitate trade through updating foreign currency regulation and finally ease the access of economic players to foreign finance.
The measures as a whole helped reverse the soaring inflation rate and slowed down negative growth in the last quarter of 2013-14 (winter). In the meantime, the achievements of 2013 eased the management of macroeconomy in the following year (beginning March 21, 2014).
The report further explains that the real GDP growth rate rose from -6.8 percent in 2012/13 to -1.9 percent in 2013-14. The sudden fall in GDP growth in 2012-13 is attributed to the sharp decline in added value in the oil group (37.4 percent), which came as a result of international sanctions imposed by the West over Iran’s nuclear energy program. The derailed economy recovered soon after an interim nuclear agreement was reached in November 2013 and the falling rate of added value in this group dropped by -8.9 during the discussed period.
The employment market has also benefited from the economic achievements. According to the Statistical Center of Iran (CSI), unemployment rate fell to 10.4 percent compared with one year earlier, when the rate stood at 12.1 percent.
The CBI report notes that curbing inflation after a prolonged spell of increase in the inflation rate is the most tangible achievement in the second half of 2013. The inflation rate that had hit the climax of 40.4 percent in October 2013 slipped later in the year. In the meantime, the consumer price index (CPI) fell from 45.1 percent in June 2013 to 19.7 percent by the end of the year. The report suggests that the relative stability in the forex market together with promising economic horizons played important roles in curbing the inflation rate.
As for the foreign payment balance, the current account surplus registered 6.4 percent increase in 2013-14 compared with the previous year reaching $28 billion. In the meantime, CBI foreign assets rose to $13.2 billion as a result of foreign currency transactions.
As a whole, despite the achievements, the overall performance of the economy in 2013-14 still lagged far behind the ideal and seemed to have been greatly affected by external pressure imposed on the Rouhani administration. During the discussed period, CBI, in turn, made every effort to utilize the limited existing capacities and take advantage of the opportunities provided by improvement in foreign relations and overcome the challenges posed by international sanctions and macroeconomic mismanagement in the past. The statistics indicate that relative success has been achieved in this respect.
