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.
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%.
US President Joe Biden, attempting to coax Iran into re-entering negotiations on reviving the 2015 nuclear deal, on October 31 pledged that if the US returned to the agreement, it would only subsequently leave if Tehran clearly broke its terms.
Although Iran has said it will return to the talks on the deal, known as the JCPOA, by the end of November, major powers in the west have become increasingly anxious that the delay in returning to the talks caused by Iran’s new hardline presidency is a subterfuge; they worry that Tehran has been using the lengthy postponement to build up its uranium stockpile. In May 2018, then US president Donald Trump unilaterally pulled Washington out of the multilateral JCPOA even though the UN was stating that Iran was in full compliance with its terms.
US Secretary of State Antony Blinken on October 31 said that Washington was “absolutely in lock step” with Britain, Germany and France on getting Iran back into a functioning JCPOA, but he added that it was not clear if Tehran was willing to rejoin the talks in a “meaningful way”.
Iran has, meanwhile, announced it is expanding its enrichment of uranium beyond the highly enriched threshold of 20% purity at a Natanz plant where it is already enriching to 60%. But the new activity does not involve keeping the product, the UN nuclear watchdog said. Nuclear weapon-grade uranium is enriched to 90%.
Iranian President Ebrahim Raisi said on October 27 that a cyberattack that paralysed every petrol station in the Islamic Republic was designed to get “people angry by creating disorder and disruption”. The Associated Press reported that long lines were still snaking around the pumps a day after the incident began.
Raisi stopped short of assigning blame for the attack, which blocked the government-issued electronic cards that many Iranians use to buy subsidised fuel. However, his remarks implied that he and other top officials believed that anti-Iranian forces carried out an assault likely drawn up to incite the country as the second anniversary of a deadly crackdown on nationwide protests over gasoline prices approached.
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, which has lately faced social unrest after inhabitants in its southwest were left struggling to access water amid the worst drought it has suffered in 50 years, conceded that its wheat harvest this year would be so inadequate that for the first time in five years the country would have to import wheat. Drought-related water deficits have also led to rolling power cuts in localities supplied by hydroelectric plants. They supply around 15% of Iran's power supply, according to energy ministry data.
Iran is 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.
Meanwhile, petrochemical production rose 8% y/y in Iran during the first half of the Persian calendar year (March 21-September 22), the National Petrochemical Company (NPC) announced on October 20. Demand for petrochemical-based healthcare products like face masks has helped drive petrochemical production amid the coronavirus pandemic. The petrochemical industry plays a crucial role in Iran’s non-oil economy. Petrochemical exports make up the second-largest source of revenue for the country after crude oil.
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.
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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