Iran has moved out of its three-year recession after recording two consecutive quarters of growth, the Central Bank of Iran’s (CBI’s) governor Abdolnasser Hemmati has announced on his Instagram account. 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.
Trump’s sanctions drive against Iran kicked in halfway through 2018, a year that brought a GDP contraction of 6%, according to the World Bank. Things worsened in 2019 as the sanctions screw was tightened, with economic output falling 6.8%. The World Bank estimates it declined by 3.7% in 2020.
Iran looks set to be engulfed by what would be its fourth coronavirus wave. Anxieties that its week-long Nowruz celebrations of the Persian new year, which took place in March to bring in the Persian year of 1400, would cause another surge of coronavirus cases appear to have been well-founded. Its daily infection count last month moved back into five figures for the first time since December.
In terms of its coronavirus vaccination programme, Iran has vaccinated roughly 80% of its medical staff dealing with COVID-19. The country started inoculating citizens in February using Russia’s Sputnik V vaccine, but progress is slow. If scheduled deliveries of other vaccines take place in coming weeks, including through the COVAX world programme, it should pick up. A domestically developed vaccine is expected to become available in May.
US President Joe Biden has said Washington will return to the pact if Tehran first resumes full compliance with the nuclear deal, including its strict limits on uranium enrichment, a potential pathway to nuclear bombs, though Iran has always denied having any ambition to develop a nuclear weapon. Iran-related US sanctions have been imposed on more than 700 entities and people, according to a Reuters tally of US Treasury actions.
Iran is demanding that all sanctions introduced under Trump—those tied to its nuclear programme, and non-nuclear penalties such as those linked to terrorism, missile development and human rights—should be rolled back.
Iran and the six world powers represented in Vienna—the US, UK, France, Germany, China and Russia—have made significant progress at the talks to revive the 2015 nuclear deal that was abandoned by Trump, but important issues still need to be resolved, Iranian Foreign Ministry spokesman Saeed Khatibzadeh told a televised weekly news conference on May 31.
A revival of the deal would see major American sanctions imposed on Tehran lifted, but there is some resistance among hardliners in Iran to striking a new agreement with the US.
During the course of the four-year Trump presidency, the rial lost 80% against the greenback. The rial was 46% down against the dollar since the start of 2020 as tensions with the Trump administration tightened and a coronavirus third wave took its toll on the economy. The currency has since recovered but remains volatile.
The Iranian rial (IRR) on May 5 reached its strongest rate against the dollar on the open market in three months, causing the central bank to deny it was boosting the currency and to say it was gaining on strengthening sentiment for a positive outcome from the ongoing Vienna talks aimed at reviving the 2015 nuclear deal. By the end of trading, the IRR reached 209,000 versus the USD.
Iran's President Hassan Rouhani on May 29 dismissed central bank governor Abdolnaser Hemmati, reportedly stating that if Hemmati retained his position while running for president in the upcoming June election, it could cause difficulties in relation to monetary and exchange rate policies.
On the political front, Iran’s Supreme Leader Ayatollah Ali Khamenei on May 27 endorsed the hardline Guardian Council election vetting body’s rejection of the leading moderate and moderate conservative candidates for Iran’s June presidential election despite an appeal to him to expand the field from the country’s outgoing pragmatic, moderate president, Hassan Rouhani. The June 18 election will see hardline judiciary chief Ebrahim Raisi take on former nuclear negotiator and conservative Saeed Jalili and five other candidates.
Touted as potentially the next supreme leader of the Islamic Republic and known for his hardline views, conservative principlist Raisi, has the second most important role in the country’s power structure. Raisi lost the 2017 presidential election to incumbent and pragmatic moderate politician Hassan Rouhani, by 57% to 38% of the vote.
Looking ahead, the January edition of the World Bank’s Global Economic Prospects report forecasts that GDP growth of 1.5%, from a very low base, is in reach for Iran in 2021. But the situation is fluid. The dropping of the sanctions by the Biden administration would lead to a big revision in prospects—in November, the Institute of International Finance (IIF) trade body said Iran’s economy could expand by as much as 4.4% in 2021 and grow by 6.9% in 2022 and 6% in 2023 if the sanctions were chucked out.
Turkey on August 18 introduced another shock rate cut. The USD/Turkish lira (TRY) pair, which had been testing the 18-level for around a month, crashed through the 18/$ threshold towards 18.15.
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