Rouhani’s Economic Record

EghtesadOnline: The government of President Hassan Rouhani is approaching its last months in office ahead of the May 10 election.

News ID: ۷۴۰۷۷۹

06 April 2017

As Iranians prepare for the upcoming presidential vote, supporters and opponents of his policies, economic ones in particular, including economists, academicians and ordinary people are engaged in heated debates evaluating the government’s performance.

When Rouhani took office in August 2013, things were not looking up. He inherited an economy in ruins, gutted by the failed policies of the previous administration, making the evaluation of his government’s performance rather knotty.

Though the signing of the nuclear deal in 2015 and the ensuing removal of sanctions in the following year is widely touted–at least by his supporters–as Rouhani’s first and foremost achievement to turn Iran’s battered economy around, according to Financial Tribune, below is a list of the administration’s other major successes in recent years:

Pulling the Rein on Inflation

The Rouhani administration in the past year managed to considerably reduce the rate of inflation, which had exceeded 40% before he took office in 2013.

Iran’s inflation rate went below 10% for the rolling year ending June 20. This was the first time the country was experiencing single-digit inflation in about a quarter century.

The average goods and services Consumer Price Index for urban areas in the 12 months ending March 20, which marks the end of the final month of the past Iranian year (Esfand), increased by 9% compared with last year’s corresponding period, according to the latest report released by the Central Bank of Iran.

The report came after the Statistical Center of Iran put Esfand inflation at 6.8%.

Both CBI and SCI are in charge of releasing periodical statistics on macroeconomic indices, which often differ from one another.

GDP Growth

According to CBI’s latest report, the Iranian economy grew 11.9% during the three quarters of the last Iranian year (started March 20, 2016).

Without taking the oil sector into account, the growth rate stands at 1.9%, the report shows.

The oil sector expanded 65.4%, thanks to ramped up crude production and increased exports following the lifting of sanctions.

The sectors of agriculture, industries, mining and services grew by 4.2%, 5.8%, 0.2% and 2.4% respectively while construction saw a negative growth of 17.1% during the nine months.

The CBI figures on Iran’s GDP growth for the three quarters came a few days after the Statistical Center of Iran released its own report for the corresponding period.

According to SCI, Iran’s economy during the nine-month period grew 7.2% including oil and 5% excluding it.

Industrial, agricultural and services sectors grew by 0.5%, 5.7% and 5.4% respectively, the SCI report showed.

Stabilizing Forex Market

CBI has managed to control foreign exchange rates and promote stability in the forex market. But the long-held stability in the currency market during much of President Hassan Rouhani’s tenure was briefly interrupted in late December when rial hit a record low of 41,500 against the greenback.

“In [the Iranian months of] Azar (November 21-December 20, 2016) and Dey (December 21, 2016-January 19, 2017), the currency market witnessed fluctuations that were mainly caused by [a peak in] seasonal trips, but CBI brought back stability to the market,” Peyman Qorbani, CBI’s deputy for economic affairs, was quoted as saying by IBENA on Sunday.

The rial lost nearly 70% of its value in the year before Rouhani took office.

The International Monetary Fund has commended Iran for achieving an impressive recovery in economic growth after the lifting of nuclear sanctions in 2016, maintaining inflation in single digits and stabilizing the foreign exchange market.

Expert View

To provide an expert view on how the country’s economy will proceed in the new Iranian year (started March 21), Financial Tribune’s sister publication Donya-e-Eqtesad recently published the informed opinions of 66 renowned economists and pundits in the field, including Mousa Ghaninejad, Tahmaseb Mazaheri, Hossein Abdoh-Tabrizi, Jamshid Pajouhan, Pouya Jabal-Ameli, Hadi Salehi-Esfahani, Kamal Seyyed-Ali and Alinaqi Mashayekhi.

They were asked to predict, based on current facts, the path ahead of economic growth, inflation and foreign exchange rate. The economists also graded the government’s last year performance (March 2016-17) on a scale of 0 to 10. Zero indicating utter disapproval and 10 marking complete satisfaction.

The first issue pertained to the range in which gross domestic product growth is expected to fluctuate by the end of the new year (March 20, 2018).

Over 56% of the respondents believe that GDP growth will range between 3% and 5%, while 30.3% predicted 1-3% economic growth. More than 12% put the figure at higher than 5% and 1.5% predicted GDP will grow less than 1%.

IMF has projected in its latest report that Iran’s economic growth will stabilize at 4.5% over the medium-term, as the country’s recovery broadens.

Real GDP growth is expected to reach 6.6% in 2016-17 and to ease to 3.3% in 2017-18, as oil production remains close to the OPEC target. Thereafter, IMF predicts, higher foreign direct investment and a gradual improvement in domestic financial conditions will drive investment and stronger non-oil sector growth.

The second issue was about the rate of inflation. Not a single expert believed that inflation will dip below 8% by the yearend. Over 13.6% said it would fluctuate between 8% and 10%. Around 53% predicted the figure to stand at 10-12% and 33.3% believed it would exceed 12%.

IMF expects inflation to temporarily rise to 11.9% year-on-year by end-2017-18, reflecting recent liquidity growth and pass-through from exchange rate depreciation, and a return to single digits on the back of prudent fiscal and monetary policies.

The final issue was about fluctuations in rial’s rate against the US dollar, to which 3% answered it will be less than 39,000 rials.

More than 74% said it would stand somewhere between 39,000 and 45,000 rials. Nearly 20% were of the opinion that the exchange rates will rise and swing between 45,000 and 50,000 rials. The remaining 3% predicted the figure to cross 50,000 rials.

The average grade given to the Rouhani administration by these economists for last year’s economic performance was 6.25. More than 77% of the respondents granted a grade of 6 or above to the government.