Iran's Q1 Growth Driven by Agro Sector

Central Bank of Iran's Governor Abdolnasser Hammati announced on Friday that growth has returned to Iran's non-oil sector.

"The first three months of the year [13]98 [current Iranian year] saw the non-oil sector, which is the productive sector of the economy, grow 0.4% compared with the corresponding period of [13]97 [the previous Iranian year]," the CBI chief wrote in a piece published on the central bank's website.

The Persian economic daily Donya-e-Eqtesad’s estimates indicate that with 6.5%, the agriculture sector registered the highest growth among Iran's economic sectors in Q1. The rate for last year's corresponding period stood at 0.3%, Financial Tribune reported.

The significant boost in agricultural production owes largely to abundant rainfall at the beginning of the year, which increased crop yields.

Agriculture Minister Mahmoud Hojjati said Iran meets 85% of its demand for agricultural products domestically and the remaining 15% is provided through imports.

According to the minister, Iran produces about $80 billion worth of agricultural products annually, $75 billion of which are consumed domestically.

Director General of the Ministry of Industries, Mining and Trade's Food, Medicine and Toiletries Industries Department Mehdi Sadeqi Niyaraki said 95% of Iran’s food industry are owned by the private sector, noting that the industry accounts for 15% of the country’s industrial employment.

More than 6.95 million tons of agricultural and food products worth over $6.4 billion were exported from Iran in the last fiscal year (ended March 20, 2019).

Agrifood exports accounted for 5.9% and 14.4% of the total volume and value of Iran's non-oil exports of 117.22 million tons worth $44.31 billion respectively over the period.

The exports mainly included fruits worth $1.6 million, vegetables worth $1.21 billion, milk and dairy products worth $604.7 million, saffron worth $351.5 million and fish and shrimps worth $313.7 million, accounting for 31%, 25.7%, 12.9%, 7.4% and 6.7% of the total value of agrifood exports respectively during the period.

Each ton of agrifood exports was valued at $920 on average, which is 143.4% more than the price of each ton of non-oil exports ($378) over the period.

Oil: The Main Laggard to Growth

The main cause behind the economy’s weak performance, on the other hand, has been the decline in oil production as a result of US sanctions. It is estimated that oil production saw an 11% contraction in spring. 

This means the overall economic growth experienced by the Iranian economy in the first quarter of the current fiscal year stood at -5%.

The report also indicates that the industry and mining sector registered zero growth, while the rate for last year's corresponding period stood at 0.1%.

The services sector is also estimated to have been slightly over 0%.

The CBI chief noted that although this growth is below the potential capacity, considering the negative growth rates of the three preceding quarters and the beginning of decline in inflation, it's a cause for hope.

Hemmati attributed the growth to the return of relative stability in the value of national currency against foreign currencies and the die-down of external shocks from sanctions and the United States "maximum pressure" campaign against Iran.

Iran's gross domestic product shrank by 4.9% in the fiscal 2018-19 compared to the year before, the Statistical Center of Iran's latest report shows.

Economic growth without taking oil production into account stood at -2.4%. 

Production of the two groups of "industry" and "agriculture" contracted by 9.6% and 1.5% respectively.

The "services" group posted a meager 0.02% 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%.

Growth in the fiscal 2017-18 has been put at 3.7% by both CBI and SCI.