IMF: Iran’s annual GDP contracts by 1.7 percent

Photo: IMF: Iran’s annual GDP contracts by 1.7 percent / Iran

Baku, Azerbaijan, April 3

By Dalga Khatinoglu - Trend:

Iran's GDP contracted by 1.7 percent in the previous Iranian calendar year (which ended on March 20).

The country's GDP growth also stood at -5.8 percent in the mentioned period.

According to the International Monetary Fund's report, which was released on April 3, Iran had achieved considerable progress in raising per capita income and living standards in previous decades. But in recent years, such progress stalled as both domestic policies and the external environment deteriorated.

The reports also reads that macroeconomic performance worsened markedly following the implementation of subsidy reform plan in late 2010 and the intensification of sanctions in 2012.

"The economy contracted by almost 6 percent in 2012/13 and 12-month inflation rose from about 12 percent in late 2010 to around 45 percent in July 2013", IMF said.

The report went on saying that the sharp fall in oil exports was the main factor [for worsening the economic performances], partly offset by import compression.

Iran's crude oil exports, as well as gas condensate, had decreased from 2.5 million barrels per day in 2011 to about one million barrels per day in 2013.

IMF says that gross foreign assets of the Central Bank of Iran (CBI) rose to about $105 billion by end-2012/13.

According to the report, since the Presidential election in mid-2013, there have been some signs of stability.

"The exchange rate has appreciated markedly in the bureau/parallel market. The CBI has kept a lid on base money growth thanks to tighter credit to the banking system and some fiscal consolidation, and 12-month inflation has declined to about 29 percent in January 2014".

However IMF says that looking ahead, the near-term outlook remains highly uncertain. Facing continued constrained prospects for oil revenues and international financial transactions, the economy is envisaged to remain stagnant in 2013/14, with real GDP estimated to decline by 1¾ percent.

With some positive tailwinds from the external side and some incipient signs that the pace of contraction in domestic demand is slowing, it is projected that economic activity would begin to stabilize in 2014/15, with real GDP projected to increase by 1-2 percent. But the current outlook remains highly uncertain and subject to downside risks.

In the meantime, the authorities are taking steps to make the regulatory framework for foreign investment in the oil sector more attractive, while upside risks emanate from the interim agreement with the P5+1.

Selected Macroeconomic Indicators, 2011/12-2013/14 1/

Est.

2011/12

2012/13

2013/14

(Annual change, in percent, unless otherwise indicated)

National accounts

Nominal GDP at market prices (in billions

of Iranian rials)

6,121,004

6,793,170

9,068,975

Real GDP at factor cost

3.0

-5.8

-1.7

Real oil and gas GDP

1.3

-34.1

-5.7

Real non-oil GDP

3.2

-3.1

-1.4

CPI inflation (average)

21.5

30.5

35.2

CPI inflation (end of period)

20.5

41.2

22.0

Unemployment rate (in percent of labor force)

12.3

12.2

12.9

(In percent of GDP)

Budgetary operations

Revenue

19.7

15.0

13.9

Of which: oil revenue

10.8

6.6

6.2

Expenditure

19.5

15.3

14.8

Expense

14.8

13.1

13.6

Net acquisition of nonfinancial assets

4.7

2.2

1.2

Net lending/borrowing (overall balance)

-1.4

-2.0

-2.2

Net lending/borrowing (budget)

0.2

-0.3

-0.9

Balance of Targeted Subsidy Organization

-1.6

-1.6

-1.3

(Annual change in percent, unless otherwise indicated)

Monetary sector

Narrow money (M1)

15.8

29.1

20.5

Broad money (M2)

19.6

30.6

24.9

(In billions of U.S. dollars, unless otherwise indicated)

External sector

Current account balance

59.4

26.3

29.2

In percent of GDP at market prices

11.0

6.6

8.0

Gross official reserves

92.2

104.4

107.7

(In U.S. dollars, unless otherwise indicated)

Oil and gas sector

Total oil and gas exports (billions)

118.2

62.9

56.3

Liquid fuels production (in millions of barrels/day)

4.0

3.2

2.8

Memorandum items:

Average exchange rate (Iranian rials per U.S. dollar)

11,312

12,260

24,770

Sources: Iranian authorities; and IMF staff estimates and projections.

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