Economy June 09, 2021 18:38 0 World Bank Revises Up Iran’s Growth Estimates, Forecasts
The World Bank has revised up its estimates and forecasts for Iran’s economic growth in its latest Global Economic Prospects reports published in June.
According to the report, the economy is forecast to experience 2.1% and 2.2% growth in 2021 and 2022 respectively.
New forecasts have been revised up by 0.6 and 0.5 percentage points respectively.
This is while forecast for 2023 GDP growth is at 2.3% in the new report.
The estimate for 2020 has been revised up to 1.7% from -3.7% in the previous report published in January.
According to the World Bank, Iran’s economy saw 6% and 6.8% contraction in 2018 and 2019 respectively.
The report’s quarterly estimates put the respective 2019 Q4, 2020 Q1, Q2, Q3 and Q4 growth rates at 1.8%, -6.8%, -2.9%, 4.9% and 3.4%.
“Despite continued pandemic-related disruptions, rising oil prices and faster-than-expected recoveries in most regional economies are supporting activity to 2.1% in 2021 and 2.2% in 2022 with a rebound in industrial production outweighing continued suppressed demand for services due to a high number of Covid-19 cases,” it said.
The new revised up forecasts and estimates come as indirect US-Iran talks on reviving the deal are due to resume in Vienna, Austria, this week.
The talks seek to revive a landmark pact under which Iran agreed to curbs on its nuclear program in return for the lifting of international sanctions, which opened the way for a brief thaw in decades of US-Iranian confrontation, according to Reuters.
Then-president, Donald Trump, abandoned the deal in 2018 and reimposed sanctions.
Trump's successor Joe Biden has said he wants to restore the deal's nuclear limits and if possible extend them to cover issues such as Iran's missile program. Iran wants all sanctions lifted and no expansion of the terms.
European Union envoy Enrique Mora, the chief coordinator of the talks, said last week he believed a deal would be reached at the upcoming sixth round of negotiations in Vienna, expected to resume on Thursday or Friday.
Adding to the impetus to make progress is an election in Iran on June 18 to replace President Hassan Rouhani, a pragmatist who promoted the original deal.
The election is not likely to change Tehran's negotiating stance.
Iran's top nuclear negotiator said last week that barriers to a revival of the deal are complicated but not insurmountable.
Abbas Araqchi added that differences have reached a point where everyone believes these differences are not insolvable.
However, none of the remaining sticking points lends themselves to rapid solutions, according to the diplomat, Iranian officials and analysts of Iranian nuclear matters.
The negotiations have made considerable progress but are now at the hardest part with the key decisions still needed, said a European diplomat briefed on the talks, which began in April.
The talks have arrived at "the heart of the matter on the nuclear dimension", a second European diplomat said.
A senior Western diplomat said that “of course” he hoped that the next round would result in a deal, but injected a note of caution, saying “until we are able to resolve the important issues that remain, we won’t know”.
An Iranian official said: "Everything depends on Washington. If the American side accepts to lift all sanctions, then Iran will return to full compliance with the deal."
In addition to seeking the lifting of Trump-era sanctions, Tehran also wants Washington to remove Iran's Revolutionary Guards from a terrorism blacklist, which can be used to bar Iranian businesses from the international financial system. It wants Europe to guarantee foreign investors will return and assurances that Washington will not renege on the deal again.
Iran’s policy toward the nuclear deal and negotiations with world powers over how to restore it will continue after President Hassan Rouhani leaves office and regardless of who takes over government, a top official said.
Ali Rabiei, Iran’s government spokesman, said because the policy of engaging with other participants in the 2015 accord, including the US, was made by Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei and has the backing of the highest levels of the establishment, it won’t change when the Rouhani administration leaves power.
Iranians are scheduled to go to the polls on June 18.
IMF Estimates, Forecasts
The International Monetary Fund expects Iran’s economy to grow by 2.5% in 2021.
In its World Economic Outlook report titled “Managing Divergent Recoveries”, IMF has put Iran’s GDP growth in 2020 at 1.5% and projects 2.1% in 2022.
According to IMF, the country experienced 13.4% growth in 2016, the year Iran’s nuclear deal with world powers, otherwise known as Joint Comprehensive Plan of Action, was implemented and international sanctions against the Islamic Republic were lifted.
The massive growth was followed by a further 3.8% in 2017. But with the walkout of the US from JCPOA under the administration of Donald Trump and introduction of new rounds of sanctions, the Iranian economy shrank by 6% and 6.8% in the following two years.
In its preface, the report refers to implications of Covid-19 for the world economy and says: “We are now projecting a stronger recovery in 2021 and 2022 for the global economy compared to our previous forecast, with growth projected to be 6% in 2021 and 4.4% in 2022. Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis.
“The divergent recovery paths are likely to create significantly wider gaps in living standards between developing countries and others, compared to pre-pandemic expectations. Cumulative per capita income losses over 2020–22, compared to pre-pandemic projections, are equivalent to 20% of 2019 per capita GDP in emerging markets and developing economies (excluding China), while in advanced economies, the losses are expected to be relatively smaller, at 11%.
“This has reversed gains in poverty reduction, with an additional 95 million people expected to have entered the ranks of the extreme poor in 2020 and 80 million more undernourished than before.”
Besides the pandemic, Iran’s economy has been grappling with the US “maximum” pressure campaign under the Trump administration. The new government led by Joe Biden is looking to revive JCPOA.
CBI, SCI Accounts
Preliminary estimates by the Central Bank of Iran show Iran’s gross domestic product in the first nine months of last Iranian year (ended March 20, 2021), using constant prices of the year ending March 2012, registered a 2.2% year-on-year growth.
Economic growth, excluding oil, expanded by 1.9%, according to CBI.
The central bank’s sectoral breakdown of growth rates shows that the “agriculture”, “oil”, and “industries and mining” groups experienced a respective growth rate of 4.6%, 3.9% and 6%.
The services sector was the main laggard of economic growth with a 0.3% contraction while construction expanded by 3.6%.
The CBI report came after the governor of the Central Bank of Iran announced that Iran’s economy came out of recession following two consecutive quarters of growth.
“The positive growth in the second quarter of the current fiscal year [June 21-Sept. 21, 2020] was reexperienced in the third quarter [Sept. 22-Dec. 20, 2020],” Abdolnasser Hemmati also wrote in an Instagram post.
He noted that Iran’s GDP rose 3.9% in Q2 compared with the corresponding period of the year before and without taking oil production into account, the growth stood at 2.9%.
“I can confidently say today Iran’s economy has weathered tough sanctions and the ensuing recession as it is repositioned on the path to growth,” he added.
Hemmati said the growth experienced by Iran’s economy is especially important since the country has been grappling with the Covid-19 pandemic and US maximum pressure in recent years.
His account of GDP growth comes after the Statistical Center of Iran put Q3 growth at 0.8%.
Growth, excluding oil sector, was at 0.2% during the three-month period, according to SCI. Details of the center’s report show “agriculture” sector saw a 5.5% expansion; “industries and mining” grew by 3.7% and “industries and mining sector, excluding oil” expanded by 3.1%. The “services” sector, however, contracted by 1.8% during the third quarter of the current year and “construction” expanded by 8.5%.
The SCI report also showed Iran’s gross domestic product contracted by 1.2% during the nine-month period compared with the corresponding period of the year before.
Economic growth, excluding oil, saw a 1% decline, according to the center, which noted that the nine-month period saw the “agriculture”, “industries and mining” and “industries and mining (excluding oil)” sectors experience growth rates of 3%, 0.8% and 2.5% respectively. The services sector contracted by 3.3% and construction expanded by 3.9%.
The Statistical Center of Iran previously reported that Iran’s gross domestic product saw a contraction of 1.9% in H1 (March 20-Sept. 21, 2020). Economic growth, excluding oil, stood at -1.3%. Only the “agriculture” and “industries and mining, excluding oil” sectors experienced growth with 1.7% and 2% respectively. The “industries and mining” contracted by 0.7% and “services” sector contracted by 3.5%.
SCI also reported economic growth in the second quarter of the current year (June 21-Sept. 21): Iran’s GDP expanded by 0.2% in Q2 while it shrank by 0.2% without considering oil sector. The “agriculture” sector saw a 2.7% expansion, “industries and mining” grew by 4% while “industries and mining sector, excluding oil” expanded by 4.2%. The “services” sector, however, contracted by 3% in Q2.
However, as the Central Bank of Iran reported economic growth, excluding oil, stood at 1.4% and when factoring in oil sector it increased by 1.3% in the first six months of last year compared with the same period of the year before.
“Economic growth, including oil sector, stood at -2.9% and 5.1% in the first and second quarters,” Hemmati had said.
According to CBI, the “industries and mines” group registered the highest economic growth (when constant prices of the year ending March 2012 are used) in Q1 (March 20-Sept. 21) with 5.4%.
The services group contracted by 0.2% in H1 to post the sharpest decline among economic groups.
The CBI breakdown of H1 economic growth rates showed that the sectors of agriculture and oil expanded 4.4% and 0.8% respectively. Within the “industries and mining” group, the mining subsector grew by 3.5%; “industry” by 6.7%; “electricity, natural gas and water” by 4.5% and “construction” by 4.1%.
Within the services group, the “commerce, restaurant and hoteliering” subsector contracted by 0.3%; “transportation, warehousing, and communications” shrank 0.6%; “services by monetary financial institutions” expanded 11.9%; “professional real-estate services” grew 1.1%; “general services” contracted 5.2% and “social, personal and home services” shrank 10.2% in H1.
According to SCI, gross domestic product saw a contraction of 3.5% in Q1 (March 20-June 20, 2020) compared with the corresponding period of last year.
Economic growth, excluding oil, stood at -1.7%. A sectoral breakdown of growth rates in the report shows only the agriculture sector experienced growth with a meager rate of 0.1%. The industries and services sectors contracted by 4.4% and 3.5% respectively.
The Central Bank of Iran came up with different figures.
According to Hemmati, Iran's gross domestic product contracted by 2.8% in Q1 (March 20-June 20year-on-year.
“A sectoral breakdown of growth rates shows the agriculture sector experienced 3.8% growth, and the industries and mining sector expanded by 2.5%, but the services sector contracted by 1.6%, which was quite predictable following the outbreak of coronavirus and restrictions imposed to prevent the spread of the disease,” he wrote in an Instagram post.
Hemmati put Q1 economic growth, excluding oil, at -0.6%.
Iran’s economy is recovering from the pandemic shock. When compared with sanctions-free countries, which only had to deal with the coronavirus, Iran’s economic performance is promising, he said.
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, Iran’s GDP shrank by -0.6% without taking oil production into account.
The sectors of "industries and mines" and ""services" saw a respective contraction of 14.7% and 0.3%. This is while the CBI governor put the last fiscal year's growth at -6.5%. Excluding the oil sector, he put the growth at 1.1%.
According to Hemmati, the oil sector shrank by a whopping 38.7% amid sanctions on Iran's oil sales.
The sectors of “agriculture” and "industries and mines" saw a respective growth of 8.8% and 2.3%, as services contracted by 0.2%, he added.
Iran's gross domestic product shrank by 4.9% in the fiscal 2018-19 compared to the year before, according to SCI, with production of the two groups of "industries" and "agriculture" at -9.6% and -1.5% respectively and services registering a 0.02% growth.
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%.
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