20% of Iranian Manufacturing Units at Industrial Towns in Recession

EghtesadOnline: Twenty percent of manufacturing units located in industrial towns across Iran have been hit by recession, a deputy minister of industries, mining and trade said.

News ID: ۷۴۶۷۴۴

20 February 2019

"Up to 30% of industrial towns’ manufacturing enterprises are operating at less than half their full capacity, 20% are working at 50-70% while the remaining are running at over 70%," Mohsen Salehinia added.

According to the official, there are 973 industrial towns in Iran, IRNA reported.

"A total of 43,000 manufacturing units are based in industrial towns, which generate 45% of the country’s total employment," Financial Tribune quoted him as saying.

Depressed demand in the domestic market, dwindling purchasing power, shortage of raw materials, ever-increasing prices leading to higher finished costs and the after-effects of sanctions are often cited as the root cause of the weakening performance of local manufacturing units in Iran.

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

Excluding the share of 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 other sectors of agriculture and industry saw contractions of 2.5% and 1.2% respectively.

Latest World Bank projections show Iran's gross domestic product will continue to contract in 2019, before reversing gear in 2020.

According to WB's latest "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 the 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 contract in 2018 and more so in 2019 as a result of reimposed 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," the IMF report read.

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