EghtesadOnline: Iran’s economic growth (using 2011 as the base year) turned from negative to positive in the first half of the current fiscal year (March 20-Sept. 21), the governor of the Central Bank of Iran, Abdolnasser Hemmati, wrote in an Instagram post.
“Economic growth, excluding oil, stood at 1.4%, and 1.3% when factoring in the oil sector in the first six months of the current year compared with the same period of last year,” he said.
“Economic growth, including oil sector stood at -2.9% and 5.1% in the first and second quarters of the current year.”
Iran’s gross domestic product, excluding the oil sector, saw a contraction of 0.6% in Q1 but an expansion of 3.2% in Q2, according to the CBI chief.
His comments came after the Statistical Center of Iran said Iran’s gross domestic product saw a contraction of 1.9% in H1. Economic growth, excluding oil, stood at -1.3%, according to SCI.
A sectoral breakdown of growth rates in the report shows that only the “agriculture” and “industries and mining, excluding oil” sectors experienced a growth of 1.7% and 2% respectively. The “industries and mining” contracted 0.7% and “services” sector contracted 3.5%.
SCI also reported economic growth in the second quarter of the current year (June 21-Sept. 21). Iran’s GDP expanded 0.2% in Q2 while it shrank 0.2% without considering the oil sector. The “agriculture” sector saw a 2.7% expansion; “industries and mining” 4% while “industries and mining sector, excluding oil” expanded 4.2%. The “services” sector, however, contracted by 3% in Q2.
According to SCI, gross domestic product saw a contraction of 3.5% during the first quarter of the current fiscal (March 20-June 20) compared with the corresponding period of last year. Economic growth, excluding oil, stood at -1.7%. A sectoral breakdown of growth rates in the report shows only the agriculture sector experienced growth with a meager rate of 0.1%. The industries and services sectors contracted by 4.4% and 3.5% respectively.
Iran’s economy shrank by 6.9% in the last fiscal year (March 2019-20). Excluding the oil sector, the rate stood at -0.5%.
Only the agriculture sector experienced a growth of 2.8% last year. The sectors of industries and services saw contractions of 14.7% and 0.7%, respectively.
The Central Bank of Iran has come up with different numbers.
According to the CBI governor, Iran's gross domestic product contracted by 2.8% during the first quarter of the current fiscal year (March 20-June 20) compared with the corresponding period of last year.
“A sectoral breakdown of growth rates shows the agriculture sector experienced 3.8% growth, and the industries and mining sector expanded by 2.5%, but the services sector contracted by 1.6%, which was quite predictable following the outbreak of coronavirus and restrictions imposed to prevent the spread of the disease,” he wrote in an Instagram post.
Hemmati also put Q1 economic growth, excluding oil production, at -0.6%.
Iran’s economy is recovering from the pandemic shock. When compared with sanctions-free countries, which only had to deal with the coronavirus, Iran’s economic performance is promising, he added.
Discrepancies were also seen in SCI and CBI reports on Iran's economic growth in the last fiscal year (March 2019-20).
According to SCI, the Iranian economy experienced a -7% contraction in the fiscal 2019-20.
According to the center, GDP shrank by -0.6% without taking oil production into account.
The sectors of "industries and mines", and "services" saw respective contractions of 14.7% and 0.3%. This is while the CBI governor put last fiscal year's growth at -6.5%. Excluding the oil sector, he put the growth at 1.1%.
According to Hemmati, the oil sector shrank by a whopping 38.7% amid sanctions on Iran's oil sales.
The sectors of “agriculture” and "industries and mine" saw respective growths of 8.8% and 2.3% respectively, as services contracted by 0.2%, he added.
Iran's gross domestic product shrank by 4.9% in the fiscal 2018-19 compared to the year before, according to SCI, with GDP of the two groups of "industries" and "agriculture" at -9.6% and -1.5% respectively and the services at 0.02% growth. The center put that year's growth without taking oil production into account at -2.4%.
The CBI did not release any report on the fiscal 2018-19 economic growth.
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, according to the Central Bank of Iran.
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 International Monetary Fund expects Iran's economy to return to growth in 2021.
In its latest World Economic Outlook report, the IMF forecasts 3.2% growth for Iran's GDP next year.
Projection for the current year's growth by the international organization, headquartered in Washington, D.C., is at -5%.
According to IMF, the Iranian GDP contracted by 6.5% in 2019.
The previous World Economic Outlook report projects the real GDP to register a 3.1% growth next year after a contraction of -6% in 2020.
It said the Iranian economy shrank by -7.6 in 2019.
"The Covid-19 pandemic is inflicting high and rising human costs worldwide. Protecting lives and allowing healthcare systems to cope have required isolation, lockdowns and widespread closures to slow the spread of the virus. The health crisis is, therefore, having a severe impact on economic activity," reads the previous report.
“As a result of the pandemic, the global economy is projected to contract sharply by –3% in 2020, much worse than during the 2008–09 financial crisis. In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8% in 2021 as economic activity normalizes, helped by policy support.”
The IMF report noted that there is extreme uncertainty around the global growth forecast.
The economic fallout depends on factors that interact in ways that are hard to predict, including the pathway of the pandemic, the intensity and efficacy of containment efforts, the extent of supply disruptions, the repercussions of the dramatic tightening in global financial market conditions, shifts in spending patterns, behavioral changes (such as people avoiding shopping malls and public transportation), confidence effects, and volatile commodity prices. Many countries face a multi-layered crisis comprising a health shock, domestic economic disruptions, plummeting external demand, capital flow reversals, and a collapse in commodity prices. Risks of a worse outcome predominate."
World Bank Forecast
The World Bank expects Iran's economy to bounce back to growth in 2021 with 2.1% in GDP expansion after having experienced an estimated 5.3% contraction this year.
In its June edition of Global Economic Prospects report, World Bank revised down its forecast for Iran's growth in 2020. The previous such report had estimated 0% growth in 2020.
However, the forecast for next year has been revised up as the previous report had forecast 1% growth in 2021.
According to World Bank, Iran experienced respective growth rates of -8.2%, -4.7% and 3.8% in 2019, 2018 and 2017.
"Iran’s GDP—which had already fallen in each of the previous two years—is expected to shrink again in 2020, by 5.3%, partly reflecting the effects of the large-scale Covid-19 outbreak on domestic consumption and the services sectors (e.g., tourism)," reads the latest report, adding that In many oil exporters, growth will be significantly constrained by renewed policy cuts in oil production.
"US-Iran tensions have not eased appreciably even as both countries attempt to cope with the effects of the pandemic," it goes on to read.