SCI: Economy Contracts by 7%

EghtesadOnline: The Iranian economy experienced a 7% contraction in the fiscal 2019-20, the Statistical Center of Iran said in its latest report.

News ID: ۷۵۰۲۲۴

13 June 2020

According to the report, the GDP shrank by -0.6% without taking oil production into account.

The sectors of "industries and mines" and "services" saw respective contractions of 14.7% and 0.3%.

The World Bank expects Iran's economy to bounce back to growth in 2021 with 2.1% in GDP expansion after having experienced an estimated 5.3% contraction this year.

In its June edition of Global Economic Prospects report, the World Bank has revised down its forecast for Iran's growth in 2020. The previous such report had estimated 0% growth in 2020.

However, the forecast for next year has been revised up as the previous report had forecast 1% growth in 2021.

According to World Bank, Iran experienced respective growth rates of -8.2%, -4.7% and 3.8% in 2019, 2018 and 2017.

"Iran’s GDP, which had already fallen in each of the previous two years, is expected to shrink again in 2020, by 5.3%, partly reflecting the effects of the large-scale Covid-19 outbreak on domestic consumption and the services sectors [e.g., tourism]," reads the latest report, adding that in many oil exporting countries, growth will be significantly constrained by renewed policy cuts in oil production.

"US-Iran tensions have not eased appreciably even as both countries attempt to cope with the effects of the pandemic," it goes on to read.

Agriculture Only Sector Experiencing Growth

Notably, the agriculture sector expanded by 3% during the period under the Statistical Center of Iran's review.

The significant boost in agricultural production owes largely to abundant rainfall at the beginning of the year, which led to increased yields of crops.

“Ninety-five percent of food demand in Iran are met by domestic production,” Mehdi Karimi-Tafreshi, a board member of the House of Industry, Mine and Trade of Iran, said, adding that about 130 million tons of food are produced by local companies annually.

“Unlike what most people think, it is the development and completion of the production chain that generates added value rather than production of raw materials by mainstream industries. Statistics say food production constitutes over 10% of the added value of the industrial sector. Much of the industries are in recession as we speak, but a significant share of Iran's gross domestic product comes from food industries,” he was quoted as saying by ILNA.

“Given the slower pace of population growth and the decline in consumers’ buying power, the development of food industries would be contingent upon their presence in regional markets. Russia, Iraq and Oman are among Iran’s key destinations of food products,” Karimi-Tafreshi said.

“Estimates put the overall turnover of food industries in Iran at around $100 billion. The industry is the biggest employer in Iran. The food industry is the biggest in terms of employment, added value and job creation rate. Out of the country’s 13,000 industrial workshops, 2,500 are dedicated to food production. It accounts for 16.8% of total employment.”

Data released by the Ministry of Agriculture show Iran exported 7.1 million tons of agricultural and food products worth over $5.82 billion in the last fiscal year that ended on March 19, 2020, to register a 2.34% rise in tonnage and 8.93% decline in value compared to the year before.

In-shell pistachio (fresh and dried) topped the list of exports in terms of value, as the country exported $724.2 million worth of the crop during the period.

Apple was the second major exported agricultural product in terms of value with $362.27 million followed by tomatoes with $259.21 million, unshelled pistachios with $240.58 million and watermelon with $175.97 million.

In term of tonnage, watermelons topped the list with 748,090 tons, followed by apples with 740,220 tons, tomatoes with 572,940 tons, potatoes with 480,440 tons and onions and Persian shallot with 394,990 tons.

Horticultural products accounted for 1.95 million tons worth $2.72 billion of total exports, up 30.03% and 19.72% in tonnage and value respectively year-on-year. Exports of agronomical products stood at 4.41 million tons worth $2.09 billion, down 5.2% and 20.42% in tonnage and value respectively YOY.

Exports of livestock and poultry products stood at 586,400 tons worth $718.87 million, down 7.01% and 34.05% in tonnage and value respectively YOY.

The fisheries sector exported 126,590 tons worth $249.3 million, up 4.58% in tonnage and down 25.21% in value YOY.

Exports from the forest and rangeland sector hit 19,080 tons worth $31.2 million, down 29.45% and 46.19% in tonnage and value respectively YOY.

Exports from the veterinary sector amounted to 350 tons worth $2.31 million, up 16.23% in tonnage and down 27.68% in value YOY.

Abundant Rainfalls to Boost Yields by 3m Tons This Year

Agricultural yields are expected to improve by 3 million tons, thanks to the current good rainfall year.

Unlike last year, when downpours and floods caused significant damages to farmers, the increased precipitation received in arid and semi-arid provinces is expected to lead to a bumper harvest this year (started March 20).

Out of nearly 18 million hectares of Iran's farmlands, 12 million hectares are rain-fed. The impact of rainfalls is more significant in arid areas in the central, southern, eastern and southeastern regions struggling for long with water shortages, drought and extended dry seasons since most of their farms are rain-fed.

“Precipitation this year have decreased 5% compared with last year but improved 32% over long-term average,” Esmaeil Esfandiyarpour, an official with Agriculture Ministry, told Persian-language daily Iran.

“Eight provinces with warmer climate have begun the harvest of wheat; thus far, 1.33 million tons of the crops have been delivered to silos. Wheat harvest will continue through September. Projections show more than 14 million tons of wheat will be produced this year.”

Noting that close to 2 million hectares of wheat farms (one-third) in Iran are irrigated and 4.05 million hectares (two-thirds) are rain-fed, Esfandiyarpour said wheat farms grown under rainwater harvesting treatment give the best grain yields compared to their irrigated counterpart.

“Fars Province, for example, received precipitation twice as much as last year; farmers are anticipating an abundant wheat crop. The province has received 400 millimeters of rain on average this year over last year’s 251 millimeters. Rainfalls this year reduced salinization of soil [the increase of salt concentration in soil] resulted from 20 years of droughts, strengthening the prospects of increase in production in dry areas.”

Farmers say the lushness of the rain-fed wheat produced this year is similar to crops grown with irrigation systems.

Rainfalls have also improved rice production and encouraged agriculture officials to issue cultivation permits for this most water-intensive crop in provinces other than northern ones. With more rain last year, the southern province of Khuzestan became one of the top producers of rice following northern provinces. Rice output exceeded 2 million tons last year. The country was almost self-sufficient in production of this strategic good.

“All provinces that enjoy bountiful water resources due to the recent high levels of precipitation and those with favorable weather conditions and enough raw material [seeds, fertilizer] can engage in rice cultivation this year. These provinces have also been allowed to dedicate more land to this cultivation,” Jamil Alizadeh Shayeq, the head of Iran Rice Association, has been quoted as saying by Young Journalists Club as saying.

A total of 2.9 million tons of rice were produced in Iran in the last Iranian year (March 2019-20), registering a 45% increase compared with the previous year, according to director general of the Ministry’s Grains and Essential Goods Bureau.

“The rise in rice output owes to the favorable weather and heavy precipitations during February and March of 2019, due to which land under rice cultivation increased by 38% to reach 834,000 hectares,” Faranak Aziz Karimi was quoted as saying by IRNA.