Iran Country Report Sep21 - September, 2021

September 1, 2021

Iran’s economy grew by 3.6% in the 2020/2021 Persian calendar year (ended March 20), Akbar Komijani, lately appointed caretaker governor at the Central Bank of Iran (CBI), was cited as saying by Press TV.
If verified, it 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.

Komijani was also reported as stating that Iranian GDP expanded in the Persian year fourth quarter by 7.7%. That was said to have followed two successive quarters of growth beginning late July 2020. 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 Iranian currency has recovered since the Trump presidency 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 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.

Iran has delivered vaccine shots to 23mn people among its population of 84mn, but that only just over 6mn had received two jabs. Following the end of a six-day lockdown, officials announced that closure orders would still apply to indoor shopping malls, wedding halls, cinemas, theatres, gyms, swimming pools, amusement parks and exhibition centres. The Iranian Chamber of Guilds estimated last week that Iran has lost as much as $10.9bn in income since the start of the pandemic early last year.

On the political front, France, Germany and the UK expressed grave concern on August 19 about a report from the UN atomic energy watchdog that concluded Iran has accelerated its enrichment of uranium to near weapons-grade. The US and its European allies have said Iran's further moves in breach of the nuclear deal threaten the currently stalled talks on reviving the deal.

The sixth round of indirect talks in Vienna came to a halt prior to the June presidential election in Iran, which saw hardline cleric Ebrahim Raisi voted in to succeed moderate politician Hassan Rouhani as president. Raisi has said his administration is committed to proceeding with the attempt at re-establishing the JCPOA.

Meanwhile, Iranian President Ebrahim Raisi said on August 16 that the United States' "military failure" in Afghanistan presented a chance to create a lasting peace in the country. Tehran’s standpoint on Afghanistan is that the country requires an inclusive Afghan government that would embrace all ethnic groups and sects.

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 subued economic growth of 1.8% this year, the IIF estimated.

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