Iran's Q3 Industrial Production Down

EghtesadOnline: The three main sectors of Iran’s economy, namely agriculture, mining and industries, delivered a poor performance in terms of production during the third quarter of the last fiscal year (Sept. 23-Dec. 21, 2018), latest data published by the Ministry of Cooperatives, Labor and Social Welfare’s Center of Statistics show.

News ID: ۷۴۷۱۵۰

27 April 2019

The Industrial Production Index of Iran's agricultural sector stood at 132.1 in Q3, indicating a decrease of 2.6% compared with the same quarter of the previous year and a decline of 2.4% compared with the preceding quarter (June 22-Sept. 22, 2018).

In the mining sector, excluding oil and natural gas, the production index was at 97.4, down by 1% compared with the same quarter of the preceding year and 1.8% over the previous quarter.

The industrial sector's IPI hit 88.5, indicating a contraction of 9% compared with the preceding year's Q3 IPI of 97.3. Compared to last year's Q2, the index also fell by 4.8%, according to Financial Tribune.

IPI is a key economic indicator in most countries and among the most significant short-term economic indicators among official data. The index provides policymakers with key data essential to drafting policies and making forecasts.

The index evaluates and shows changes in the amount of goods and services produced in various sectors. Of note, the index deals with quantity, meaning that it is not affected by price fluctuations.

Supported by Growth Data

The Statistical Center of Iran's latest report on Iran's economic growth also supports the IPI trend.

According to SCI, Iran's gross domestic product saw a contraction of -3.8 during the first three quarters of the last fiscal year (March 21-Dec. 21, 2018) compared with the corresponding period of the year before.

Economic growth, excluding oil production, stood at -1.9%.

A sectoral breakdown of growth rates in the report shows only the services sector experienced a growth of 0.6% during the period.

The industrial and agricultural sectors contracted by 7.9% and 2.1% respectively.

The weak performance of the economy is mainly due to last year's reimposition of sanctions after US President Donald Trump unilaterally walked out of the nuclear deal Iran had signed with world powers, including the US, in 2015.

The first round of renewed US sanctions reimposed on August 7 prohibits Iran's purchase of US dollars and precious metals, part of a larger move that attempts to cut the country off from the international financial system. A second tranche of sanctions on Iran's oil and gas sector took effect on Nov. 4.

Industrial Investment Shows Good Prospects

Despite the weak performance of industries during the period, the Ministry of Industries, Mining and Trade's data for the nine months to Dec. 21 show bright prospects for industrial investment in Iran.

Over 2.16 quadrillion rials ($15.42 billion) worth of investments are expected to be made in Iranian industrial units for which establishment permits were issued during the period. About 420.71 trillion rials ($3 billion) were invested in projects for which operating licenses were issued.

The volume of abovementioned investments shows a respective growth of 89.1% and 104.8% compared with the similar period of last year.

A total of 16,694 establishment permits were issued over the nine months, registering an 18.9% growth year-on-year.

The upcoming projects are expected to create a total of 393,455 jobs—24.3% more compared with last year's corresponding period.

The field of foodstuff and beverages saw the highest number of establishment permits (2,339) to create the highest number of jobs among other fields (55,798).

The highest amount of investment in to-be established units is expected to be made in projects related to production of coke and oil derived products (660.39 trillion rials or $4.7 billion). The volume accounts for around 30.6% of all investments to be made in projects for which establishment permits were issued over the period.

A total of 4,287 operating licenses were issued during the same period, which shows a 3.9% growth YOY. These projects are expected to create a total of 76,505 jobs, 10.7% more compared with last year's corresponding period.

The number of operating licenses issued for industrial projects located in free trade and special economic zones stood at 227, indicating a 12.4% growth YOY. More than 23.43 trillion rials ($167.35 million) worth of investments were made in these projects to create 6,366 jobs, registering a 312.1% and 80.3% growth respectively YOY.

The field of rubber and plastic production saw the highest number of operating licenses at 669.

Projects in the field of foodstuff and beverages for which operating licenses were issued created the highest number of jobs (10,865).

The highest volume of investments in this vein were made in projects related to coke and oil derivatives production (207.59 trillion rials or $1.48 billion), accounting for 59.3% of all investments made in industrial units with operating licenses.

Finally, a total of 436 mineral production permits were issued during the nine months, registering a 21.7% fall compared with the similar period of last year.

These permits are expected to create 3,561 jobs, which indicate a 19.4% decline year-on-year.

The nominal mineral extraction capacity of these projects exceeds 12.83 million tons, which shows a 62.7% decrease compared with the corresponding period of last year.

According to the report, 759 exploration permits were issued over the eight-month period to register an 8% increase YOY.

Exploration costs stood at more than 426.1 billion rials (over $3.04 million), registering a 13.6% decrease YOY.

About $15b in Exports

Iran’s industrial exports amounted to $14 billion, while those of the mining sector hit $970.2 million during the nine months to Dec. 21, the Ministry of Industries, Mining and Trade's official news service Shata reported.

The report added that banks and credit institutions paid 1.37 quadrillion rials ($9.78 billion) in loans to the industrial and mining sector combined, which shows a 16.1% rise YOY.

This is while the commercial sector received 656 trillion rials ($4.68 billion) worth of loans, registering a 16.4% rise YOY.

The ministry’s report also points out that 50 foreign investment projects (industrial, mining, and commerce) with a total investment of $837 million were approved during the nine months.