World Bank Forecasts Iran’s Economic Growth to Slow Down

EghtesadOnline: Growth in FY2023/24 has been revised down by 0.5 percentage point to 2.2%, on account of slower growth in key trading partners and new export competition from discounted Russian oil.

News ID: ۷۵۲۱۸۴

13 January 2023

In a new report, the World Bank has forecast Iran’s economic growth to slow down in the years to come.

“In the Islamic Republic of Iran, growth in FY2023/24 has been revised down by 0.5 percentage point to 2.2%, on account of slower growth in key trading partners and new export competition from discounted Russian oil. Domestic demand is also likely to be curbed by the effects of high inflation on real incomes, which is expected to average 44% in FY2023/24. Growth is projected to slow further, to 1.9%, in FY2024/25,” reads the World Bank’s January 2023 edition of flagship Global Economic Prospects report.

The report estimates that Iran’s real GDP growth at market prices will stand at 2.9% in the fiscal 2022-23, down from 4.7% in the previous year.

Output in the Islamic Republic of Iran is boosted in 2022 by “the waning of the pandemic and higher oil prices. Growth is expected to slow subsequently, however, as unresolved structural challenges and feeble fixed investment limit the country’s growth potential,” read part of the June edition of Global Economic Prospects report.

The International Monetary Fund is expecting Iran’s economy to grow by 3% in 2022.

In its World Economic Outlook report titled “War Sets Back Global Recovery”, the IMF said the economy expanded by 4% in 2021.

Predictions for 2023 and 2027 are at 2%.

The IMF has put Iran’s 2014-2020 GDP growth at 5%, -1.4%, 8.8%, 2.8%, -2.3%, -1.3% and 1.8% respectively with the 2004-13 average at 2.5%.

CBI, SCI Estimates

Iran’s economy grew by 3% in the first half of the current Iranian year (March 21-Sept. 22) compared with the similar period of last year, the Central Bank of Iran said in a reported released on Dec. 22.

Without taking into account the production of crude oil, growth rate stands at 2.7%, the report said.

The groups categorized by the bank as “agriculture”, “petroleum”, “industries and mines” and “services” saw respective GDP growth rates at 1.1%, 6.6%, 3.8% and 2.6%.

The CBI report came after the Statistical Center of Iran said the economy grew by 3.3% during the same period year-on-year.

The center says GDP growth stood at 3.4%, without taking into account crude oil production.

A sectoral breakdown of the GDP shows agriculture registered -2.2%, “industries and mines” 5% and services 2.6% in growth rates during the period under review.

The “industries and mines” group includes the subcategories of “crude oil and natural gas extraction”, “other mines”, “industry”, “energy” and “construction” which saw respective growth rates of 3.2%, 0%, 4.9%, 12.9% and -1.6%, according to SCI.

SCI had earlier put last Iranian year’s (March 2021-22) growth at 4.3%, saying the GDP saw a 3.5% rise without taking crude oil production into account and that the sectors of agriculture, industries and services experienced -3.7%, 6% and 4.5% growth respectively.

According to CBI, the economy grew by 4.4% in the fiscal 2020-21. It said the GDP growth stood at 3.9% without taking crude oil production into account. And that “services”, “oil and gas”, “industries and mines”, and “agriculture” saw respective growth rates of 6.5%, 10.1%, 1.1% and -2.6%.

According to CBI, Iran’s gross domestic product in the fiscal 2020-21 saw 3.6% growth. Economic growth, excluding oil, expanded by 2.5%.

According to SCI, the year’s GDP expanded by 0.7% compared with the year before.

Economic growth, excluding oil, saw an economic growth of near zero.

Discrepancies were also seen in SCI and CBI reports on Iran's economic growth in the fiscal 2019-20.

According to SCI, the Iranian economy experienced a -7% contraction in the fiscal 2019-20.

According to the center, the GDP shrank by -0.6% without taking oil production into account. This is while CBI put fiscal 2019-20 growth at -6.5%. Excluding the oil sector, growth was put at 1.1%.

Iran's gross domestic product shrank by 4.9% in the fiscal 2018-19 compared to the year before, according to SCI. The center put that year's growth, without taking oil production into account, at -2.4%.

The CBI did not release any report on the fiscal 2018-19 economic 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 by 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%.