Iran Country Report Apr22 - April, 2022

April 8, 2022

Iran’s economic growth recorded 5.7% in the third quarter of the current Iranian calendar year (September 23 – December 21, 2021), according to a report by the Central Bank of Iran (CBI) on March 14. Iran’s economy has continued to rebound despite US sanctions still levied on it through local production and a boost in exports thanks to high oil and gas prices in the global market.

The CBI’s report said that the country’s gross domestic product (GDP) stood at $13.4bn in the three-month period, showing 5.7% growth compared to last year’s corresponding period. The report put the country’s overall economic growth in the nine months to December 21, 2021 at 4.1%.

The World Bank in its latest Global Economic Prospects published on January 11 has upgraded its real GDP growth projections for Iran, anticipating estimated GDP gains of 3.1% in 2021, 2.4% in 2022 and 2.2% in 2023.

The International Monetary Fund (IMF) in its World Economic Outlook published on October 13 has stuck with its forecast for a 2.5% expansion in Iran’s economic growth in 2021. The Fund also predicted that figure in April. However, the IMF now calculates 2020/2021 Persian calendar year (ended March 20) GDP growth in Iran was 3.4%, up from its previous suggestion of 1.5%. For 2022, it anticipates 2.0%.

This would mean Iran has emerged from the long and bitter three-year recession that set in around May 2018 following then US president Donald Trump’s reintroduction of heavy sanctions on Tehran. Officials have credited higher exports and a general realignment of the economy, necessitated by the impact of heavy US sanctions, with securing the new growth.

Iran made an attempt on April 4 to bring some clarity to the unfinished Vienna talks aimed at finding a path for the restoration of the 2015 nuclear deal—the Iranian representatives, it said, would not return to the Austrian capital for further negotiations, they would only turn up to finalise an agreement.

The US and Iran have held eight rounds of indirect talks in Vienna since April last year aimed at reinstating the JCPOA that lifted major sanctions imposed on Tehran in exchange for restrictions on its nuclear programme aimed at ensuring it is kept entirely civilian. As Iran has not yet agreed to face to face talks with the US in the Austrian capital, officials of the three European states signed up to the nuclear act as intermediaries between the Iranian and American delegations.

A key outstanding issue in the Vienna talks is Tehran's demand that the Islamic Revolutionary Guard Corps (IRGC) of its armed forces is removed from the US list that designates foreign terrorist organisations, or FTOs.

On April 3, Iran's Foreign Minister Hossein Amir-Abdollahian, during a phone conversation with UN Secretary-General Antonio Guterres, said an agreement to relaunch the JCPOA was "close".

Iranian President Ebrahim Raisi on March 29 approved the public budget for the new Persian year (started March 20). Raisi previously unveiled a state budget that targeted GDP growth of 8%. The budget was also formulated on the basis of crude oil sales of 1.2mn barrels per day (bpd) with the perspective that US sanctions would be kept in place. The growth projects include 4.5% in investment growth and 3.5% in productivity growth.

With US sanctions still in place in an effort at keeping Iranian oil off world markets, Iran has been relying on China turning a blind eye to American demands to import substantial amounts of Iran’s crude on the grey market.

Iran's oil export volume is running at a level 40% higher than was seen a year ago even though US sanctions aimed at the country's petroleum industry are still in place, official news agency Shana on April 3 reported National Iranian Oil Co (NIOC) CEO Mohsen Khojasteh-Mehr as saying.

On April 1, Tasnim News Agency reported Oil Minister Javid Owji as stating that Iran's oil production, at more than 3.8bn barrels per day (bpd), had reached pre-sanctions levels. As progress to expand oil production continues, Owji reiterated plans to increase capacity to 5.7mn bpf by end of the decade.

Iran has commissioned the final refinery under its project to develop the supergiant South Pars gas field, which is aiming to significantly increase supplies to cater to rampant demand.The overall South Pars development includes 37 platforms across the field’s 24 phases to produce 700mn cubic metres per day at present of Iran’s roughly 1bn cubic metre per day total.

Meanwhile, Iran’s non-oil foreign trade in the last Persian year (ended March 20) hit a record value of more than $100bn, according to Iranian Deputy Economy Minister Alireza Moqaddasi, as cited by Tasnim News Agency on March 27. Trade was up 38% y/y, he added. Exports reportedly stood at $48bn, up 41% y/y, while imports were worth $52bn.

Annual inflation is running at slightly more than 40% in Iran but there have been local reports of certain essential food items subject to inflation of much more than that figure.
The consumer price index (CPI) inflation figure released by the SCI was 42.4% in the 10th Persian month (ended January 20), a modest improvement on the 43.4% recorded in the 9th Persian month. Food, beverage and tobacco prices moved up 1.7% m/m, while services and non-food prices gained 2.7% m/m.

The price of Iranian rice has leapt by 95% in the past year, according to the Statistical Center of Iran (SCI). One factor in the steep price hikes is drought, with the government having to step up imports of rice to counter disappointing Iranian rice harvests. Some premium varieties of Iranian rice hit record price highs of around Iranian rial (IRR) 1.15mn rials.

On the political front, the Iranian government and ruling clerics have refrained from referring to Russia’s attack on Ukraine as an invasion, while at the same time officials have pointed the finger at Nato for claimed provocations that led up to the military assault.
Iranian foreign ministry spokesman Saeed Khatibzadeh also hit out at the Western defence alliance, saying that “the Eurasia region is on the verge of entering a pervasive crisis” because of Nato moves led by the US.

Looking ahead, the Institute of International Finance (IFF) forecast that should the signatories to the original JCPOA manage to agree a comprehensive new nuclear agreement that moves beyond the 2015 terms, Iran would see GDP expand by 4.3% this year and by 5.9% and 5.8% in 2022 and 2023, respectively.

If Tehran and the major powers fail to strike any agreement to revive the JCPOA, unemployment in Iran would likely remain in double digits and there would be subdued economic growth of 1.8% this year, the IIF estimated.

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