Iran Economic Growth at 4.4%

EghtesadOnline: Iran's economy grew by 4.4% in the first three quarters of the current fiscal year (March 21-Dec. 21, 2017) compared with last year's corresponding period, according to the Statistical Center of Iran's latest report released on Wednesday.

News ID: ۷۸۲۱۴۵

17 March 2018

GDP growth, excluding oil production, reached 4.7% during the period, SCI's news portal reported.

The report shows gross domestic product stood at 5.6 quadrillion rials ($116 billion) in the nine months, including the oil sector, and 4.16 quadrillion rials ($86 billion), excluding it (based on the fiscal 2011-12 prices).

A sectoral breakdown of growth indicates the sectors of 'agriculture' and 'industry' (comprising crude oil, natural gas and other mineral extractions, industrial production, energy and construction) grew by 1% and 3.1% respectively, Financial Tribune reported.

The services sector saw the highest growth of 7% during the nine-month period.

The services sector consists of wholesale and retail trade; restaurants and hotels; transport, storage and communications; financing, insurance, real-estate and business services; as well as community, social, education and health services.

This sector employs nearly half of Iran's working-age population.

SCI's previous announcement on Iran's DGP growth put the rate at 5.6% in the first half of the current fiscal (March 21-Aug. 22, 2017) year-on-year, reaching 6% without oil production.

The Central Bank of Iran said Iran’s economy grew by 4.5% in H1, putting expansion in the oil sector at 5.8%.

CBI has not yet released its own report on Iran's growth during the first three quarters.

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%.

The astronomical growth experienced in Iran after the removal of international trade restrictions on the economy as a result of the nuclear deal the country signed with world powers in 2015 (which came into effect in January 2016), owed to a great extent to Iran's ability to increase its oil sales.

"Growth has begun to broaden in the non-oil sector," read a statement by Catriona Purfield, who led an International Monetary Fund team to Iran last year.

Government data show Iran’s crude oil production reached 3.8 million barrels per day by the end of the last fiscal from around 3 million bpd the previous year.

Under the sanctions regime, crude output fell to 2.5 million barrels per day and exports were limited to barely 1 million bpd to a few customers in Asia.

On average, Iran exported 400,000 barrels daily, or 64 million liters per day, of oil byproducts to buyers in the Middle and Far East in the fiscal 2016-17, up from around 220,000 bpd in the previous fiscal year.

Outbound shipments of oil byproducts are expected to rise by 200,000 barrels a day to 600,000 barrels daily in the current fiscal year, a report by the National Iranian Oil Products Distribution Company said.

However, as crude production reaches pre-sanction levels, there is not much room left for growth in this key sector.

> Projections

IMF expects Iran’s real GDP growth to reach 4.2% in 2017-18, projecting it to be sustained or even rise toward 4.5% over the medium term, if financial sector reforms take hold.

“Notwithstanding the recovery, the economy faces near-term challenges. Rising financial vulnerabilities and external uncertainty call for the urgent implementation of the planned financial sector reform. A coordinated reform package that also sees the government take additional fiscal measures to reduce debt, unify the exchange rate and transition to a market-based monetary policy framework would send a strong signal of the authorities’ commitment to stability,” an IMF report reads.

The World Bank, in its latest “Iran’s Economic Outlook” report, sees stronger growth for Iran in 2018-19 “as investment growth turns positive and accelerates along with more political and economic stability”. It estimates a 3.6% GDP growth at constant market prices and 3.5% at constant factor prices for the Iranian economy in 2017.

The estimates for 2018 and 2019 are at 4% and 4.3% at constant market prices and 3.9% and 4.1% at constant factor prices respectively.

And the United Nations, in its latest World Economic Situation Prospects, has forecast a 5.3% economic growth for Iran in 2017, noting that the growth is projected to reach 5.1% and 5% over the next two years respectively.

“The economic situation in the Islamic Republic of Iran has improved visibly in recent years. In 2017, GDP growth remained relatively robust at 5.3%, after surging by an estimated 12.5% in 2016 due to the strong expansion of oil production and exports. GDP growth is expected to remain above 5% in 2018 and 2019, supported by easing monetary conditions and an improving external sector,” the UN report reads, adding that future economic growth in Iran depends on attraction of foreign direct investment.

“The moderately favorable outlook depends on the capacity to attract foreign investments and is subject to significant geopolitical risks and uncertainties.”

Meanwhile, the research arm of Iranian Parliament has recently revised upward its estimates of economic growth for the current fiscal year (March 2017-18) from the previous 4.1% to 4.6%.

According to Majlis Research Center, the two sectors of transportation (8%) and general services (11%) will register the biggest growth, thanks to the boost in foreign trade and overseas flights.

The parliamentary think tank expects the agriculture sector to expand by 3.8%, oil sector by 3.1%, the industrial sector by 4.6% and services sector by 5.9%. It expects the construction sector to shrink by 2.4%.

Earlier, SCI forecast a 3% economic growth for the next fiscal year (March 2018-19).