Iran Parliament Think Tank Forecasts Grim Outlook on Economic Growth

EghtesadOnline: The performance of Iran’s real economy was weaker than expected in the first half of the current fiscal year (March 21-Sept. 22, 2018), a report by the research arm of Iranian Parliament reads.

News ID: ۷۴۶۵۴۹

26 January 2019

While the government’s operating and capital expenditure as well as private sector investment remained almost unchanged at the nominal level, the rise in consumer and producer price indexes has offset the real growth of sectors, including construction and public services.

Sanctions and the unfavorable condition of foreign currency market in H1 are expected to hurt Iran’s economy in the fiscal 2018-19 and more so in the fiscal 2019-20.

In its latest report, the parliamentary think tank has analyzed Iran’s real economy and forecast two scenarios for the economic growth of the main sectors in the current and next years, Financial Tribune reported.

Under the first scenario, the export of crude oil and gas condensates will decrease by 800,000 barrels per day in the second half (Sept. 23, 2018-March 20) to reach 1.9 million barrels per day in the current year (March 2018-19) while the daily export of crude oil and gas condensates will reach 1 million barrels in the next fiscal year (March 2019-20).

In the second scenario, which is more pessimistic, oil and gas condensates exports will decline by 1.6 million barrels a day in H2 and average annual exports will reach 1.5 million barrels a day in the fiscal 2018-19. Daily exports of oil and gas condensates will reach 800,000 barrels a day during March 2019-20.

This year, the research center announced, Iran’s economy will contract 2.6% under the first, more optimistic scenario and 5.5% under the second, pessimistic scenario. Iran’s gross domestic product without oil is estimated to grow 0.5% under the first and contract 0.5% under the first scenario this year.

Next year will see country’s economy shrink 4.5% under the first scenario and 5.5% under the second scenario whereas, the country’s GDP growth without oil will be zero under the first scenario and contract 1% if the second scenario is realized.

The parliamentary think tank's forecast for the economic growth in agriculture sector for the current fiscal is 1.2% under both first and second scenarios. The oil sector will contract 14.5% if the optimistic scenario plays out and shrink 26% under the pessimistic situation.

The industries sector this year is predicted to contract 2% and 4.5% under first and second scenarios, respectively.

Water, electricity and natural gas sector will grow 3.6% under both scenarios this fiscal.

The construction sector is forecast to contract 8% under first and 11.5% under the second scenario this year.

Services sector is predicted to grow 1% under the optimistic scenario and 0.5% under the pessimistic scenario this year.

The report by Majlis Research Center has yet to calculate sectoral economic growth for next year.

The Statistical Center of Iran's latest report shows Iran's gross domestic product during the first half of the current fiscal year (March 21-Sept. 22) saw a 0.4% growth compared with last year's corresponding period.

By excluding oil sector from GDP, growth stood at 0.3%.

The breakdown of GDP for the three economic sectors under SCI review shows only the services sector experienced a growth of 2.3%. The two sectors of agriculture and industry saw 2.5% and 1.2% contractions respectively.

The latest World Bank report estimates Iran's economic growth will continue to experience contraction in 2019, before positive growth emerges in 2020.

According to WB's "World Economic Prospects" report published after the New Year, Iran's GDP is bracing for further contraction in 2019 to reach -3.6% after experiencing an estimated -1.5% in 2018 before stabilizing in positive territory at 1.1% in 2020 and 2021.

The estimates for 2018, 2019 and 2020 show -5.6%, -7.7% and -3.1% changes compared to World Bank's June 2018 projections.

The International Monetary Fund, in its latest World Economic Outlook, expected Iran's economy to have contracted in 2018 and further more in 2019 as a result of the reimposition of US sanctions against the Islamic Republic.

"Prospects for 2018–19 were marked down sharply for Iran, reflecting the impact of the reinstatement of US sanctions," read the IMF report.

"The downward revisions reflect to an important extent the worsening of growth prospects for Iran, following the reimposition of US sanctions. The economy is now forecast to contract in 2018 (by 1.5%) and especially in 2019 (3.6%) on account of reduced oil production, before returning to modest positive growth in 2020–23."