Iran Country Report Dec21 - December, 2021

December 6, 2021

The International Monetary Fund (IMF) in its latest 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 when former US president Donald Trump hit Tehran with renewed and intensified heavy sanctions.
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.

November 29 saw the resumption of the Vienna talks between Iran and major powers aimed at finding a path to revive the 2015 nuclear deal, or JCPOA. Suspended five months ago, partly to avoid clashing with the Iranian presidential election, the talks resumed amid low expectations.

US Secretary of State Antony Blinken told reporters on December 2 that he could judge in a day or so if Iran was engaging in the resumed Vienna nuclear deal talks in good faith. Blinken made the comments in Stockholm after Iran provided the European powers—who as intermediaries are shuttling between US and Iranian officials in Vienna—with drafts on sanctions removal and nuclear commitments.

The UN nuclear watchdog, the International Atomic Energy Agency (IAEA), stated on December 1 that Iran had started producing enriched uranium with advanced centrifuges at its Fordow plant dug into a mountain, further eroding the worth of the nuclear deal, drawn up to ensure Iran’s nuclear development programme is kept entirely peaceful in return for the lifting of sanctions on Tehran.

The IAEA announcement prompted Israel to call on world powers—Iran is directly negotiating with JCPOA signatories France, Germany, the UK, China and Russia and indirectly with the US via intermediaries—to stop the Vienna talks immediately. Iran on December 1 accused Israel of attempting to poison the atmosphere at the resumed nuclear deal negotiations in Vienna by spreading lies about Iranian nuclear development activities.

Iran on November 21 began a military court trial of 10 defendants of different military ranks over the shooting down of the January 2020 Ukraine-bound flight PS752. High-level Iranian officials should be seen as responsible for the downing of the plane by a missile unit of the Islamic Revolutionary Guard Corps (IRGC), families of 140 of the victims said in a report released on November 24.

Iran this summer has suffered its worst drought in 50 years. The country has lately faced social unrest as riot police in Isfahan province arrested 67 people on November 27 at the scene of ongoing protests over the drying up of a river and water shortages. Mismanagement by the authorities has been cited as a big factor in water crises seen in many parts of Iran.

The International Grains Council (IGC) has cut its forecast for 2021/22 global wheat production, with a downgraded outlook for the crop in Iran a particular concern. Iran’s wheat imports are set to reach a record level in the Persian calendar year ending next March amid the impact of severe drought on domestic crops.

Meanwhile, trade between Iran and the European Union—still heavily constrained by US sanctions—edged up by 2% y/y to a value of €3.4bn during the first nine months of this year, according to the Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIMA).
Iran’s exports were valued at €554mn (up 14% y/y), while imports from the bloc were recorded at €2.7bn (down 0.6%).

Iran’s annual inflation was posted at 45.2% in the fifth Persian calendar month, highest in 27 years, the Statistical Centre of Iran (SCI) reported on August 24. SCI reported that the fastest inflation hikes occurred with food and beverages and tobacco, especially given price rises of vegetables, dairy products, eggs and bread.

Iran is also struggling with its fifth and most deadly wave of coronavirus wave. The massive upswing in infections is partly due to the poor rollout of vaccines in the country and large increase in black market sales forcing many to have to go without any protection from the virus. By October 20, daily infections were again running over the 10,000-threshold. The official coronavirus death toll, meanwhile, stands at 124,000, though officials have conceded the real number could be twice as high.

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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