Growth Returns to Iran’s Non-Oil Sector in Q1

EghtesadOnline: Growth has returned to Iran's non-oil sector, says Central Bank of Iran's Governor Abdolnasser Hammati.

News ID: ۷۴۸۴۸۶

21 September 2019

"The first three months of the year [13]98 [the current Iranian year that started on March 21], saw the non-oil sector, which is the productive sector of the economy, grow 0.4% compared with the corresponding period of [13]97 [last Iranian year]," the CBI chief wrote in a piece published on the central bank's website.

"Although this growth is well below the potential capacity, considering the negative growth rates of the three preceding quarters and the beginning of deflation, it's a cause for hope," he added.

Hemmati attributed the growth to the return of relative stability in the value of national currency against foreign currencies and the lessening of external shocks from sanctions and the United States "maximum pressure" campaign against Iran, Financial Tribune reported.

The rial lost about two-thirds of its value against the dollar in the last Iranian year. The national currency has regained part of the lost ground in recent months and it has been a while since the rate has stabilized around 114,000 rials per dollar.

The average goods and services Consumer Price Index in the 12-month period ending Aug. 22 increased by 42.2% compared with last year’s corresponding period, the Statistical Center of Iran's latest report shows.

SCI had put the average 12-month inflation rate for the Iranian month that ended on July 22 at 40.4%.

Consumer prices registered a year-on-year increase of 41.6% in the fifth Iranian month ending Aug. 22 compared with the similar month of last year.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 180.8 in the fifth Iranian month, indicating a 0.6% rise compared with the previous month.

The weak performance of the economy should be traced back to last year's enforcement of sanctions by the United States described as "toughest ever" by its imposers 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 Aug. 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.

Oil, Iran's main source of revenue, has taken the brunt of sanctions.

"To bolster this growth in the upcoming seasons and to give a boost to productive sectors (of the economy), the banking system has committed to help fund the enterprises," he said, noting that Iranian banks will allocate about 1,000 trillion rials ($8.77 billion) in loans to major industries in the remainder of the current Iranian year (to end March 19, 2020).

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, excluding oil production, 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.