Economist: H1 Growth Not Sustainable

EghtesadOnline: Iranian economist Morteza Imanirad believes that tapping into empty capacities of production units, the rise in oil revenues and a modest increase in demand are the main reasons behind the growth experienced in the industrial sector during the first half of the current fiscal (March 21-Aug. 22).

News ID: ۷۸۰۹۱۹

31 December 2017

Other reasons, according to Imanirad, include calm and stability in the business environment, foreign exchange market and the political arena, Financial Tribune reported.

“Having said that, growth cannot be generalized to all Iranian industries. Figures provided by SCI and the Central Bank of Iran only include workshops with over 100 workers, whereas the backbone of Iran’s industries are small- and medium-sized enterprises,” he said in an interview with the Persian weekly Tejarat-e Farda.

By definition, enterprises run by 100 workers or less, and 50 workers or less are considered medium- and small-sized businesses respectively, according to Iran’s Small Industries and Industrial Parks Organization.

According to the Statistical Center of Iran’s latest report, Iran’s economy grew by 5.6% in H1. It put the growth at 6% without taking into account oil production. Agricultural production expanded by 0.9% while the industrial sector (comprising crude oil, natural gas and other mineral extractions, industrial production, energy and construction) grew by 4.4%. The services sector saw the highest growth of 7.2% during the first half of the current year.

“Growth in industries is seasonal. In summer, demand for durable goods normally increases. Budget allocations are made, all markets are active and businesses emerge from spring holidays.

On top of that, construction-related industries become more active in summer. H1 economic growth of industries seems to be positively affected by the growth posted in construction sub-sector, which will decline in the second half of the year,” Imanirad said.

Noting that economic growth is likely to decrease in H2, the economist said factors that stimulated economic growth in the first half of the year are not all long-lasting.

“Factories will be eventually fully utilized, as oil exports will do little for the economy. Therefore, it seems necessary to improve productivity and encourage foreign investment by providing considerable incentives and facilities, if we intend to have higher economic growth rates,” he said.