A glance at Iran's economy during Rouhani's presidency

A glance at Iran's economy during Rouhani's presidency

By Dalga Khatinoglu

Dropping GDP from $550 billion in 2009 to $367 billion in 2013, rising inflation rate from 12.4 percent in 2010 to 32.6 percent in mid-2013, rising liquidity by 6.5 time during Ex-President Mahmoud Ahmadinejad's 8-year presidency to mid-2013, dropping the national currency value by 3.5 times from 2011 to mid-2013, etc.

These are only the "plot" of the tragedy, not the whole story of Iran's economy during Ahmadinejad's presidency.

But what has been changed during the last year and a half of Hassad Rouhani's presidency?

During his term in office, the previous president, Ahmadinejad not only called the imposed international sanctions on Iran's nuclear program "a worthless piece of paper", but his administration released economic statistics that were "mixed, delayed and fake" according to the new administration and economic experts' views.

A glance at Iran's economy during Hassan Rouhani's presidency, starting in mid-2013, shows positive progress in economic performance, the inflation rate actually decreased to about 18 percent last month, and the GDP, which contracted by 8.7 percent during Iran's last two fiscal years, experienced 4.6 percent growth during spring.

Iran's fiscal year starts on March 21, coinciding closely with the beginning of spring equinox.

According to the International Monetary Fund, Iran's GDP growth is expected to reach 1.5 percent and 2.2 percent in 2014 and 2015 respectively after an 8.7 percent contraction over the past two consecutive years.

Iran's foreign exchange market has also experienced more stability since mid-2013 although Iran's national currency lost value against the USD by 3.5 times from 2011 to mid-2013.

"continuance of vague stats"

Iran's Fars News Agency quoted the Managing Director of Iran Industrial Investment Company Reza Soltanzadeh on Nov. 26 as saying that "Iran's GDP is about $480 billion at current US$ and $1000 billion at purchasing power parity (PPP)". The mentioned figures are hugely different from international statistics calculated by the World Bank, OPEC, IMF, etc., who put the figure around $370 billion.

While Iran's officials say the country's exports increased by 19 percent in value during the first seven months of current fiscal year (March 21 to Oct.23) and the statistics are true, but the non-oil exports' share in this figure is only 2.5 percent. Since Iran's gas condensate export increased by 61.6 percent and petrochemicals, LPG, tar, etc. exports increased by 17.8 percent during the mentioned time, then the increase in exports relies on rising the crude oil and petroleum products export, not non-oil commodities.

Some experts, including the head of World Trade Center of Tehran have serious doubts about the economic performance announced by the government, but they admit that the situation has improved during Rouhani's Administration compared to Ahmadinejad's.

Mohammad-Reza Sabzalipour the head of World Trade Center of Tehran told Trend on Nov.27 that with even a superficial look at the economic situation comes the realization that apart from all of the wrong policies of the previous government, most of Iran's vulnerability is as a result of enforcing "wrong tastes" and adopting wrong policies in economic system. Residually, they have caused Iran's economic system to suffer, although international pressures and imposing sanction by western nations have exacerbated it.

The U.S. and EU imposed tough sanctions on Iran to persuade it to curb its sensitive nuclear program in mid-2012. The heaviest ones are those imposed on Iran's oil exports and revenues, as well as blacklisting the Central Bank of Iran, but these have eased a bit after the interim nuclear accord achieved in last November.

Conversely, some economic factors worsened. For instance the liquidity amount increased by 25 percent in 12-months as of October and reached about $200 billion.

Sabzalipur says that sanctions have been effective, but economic mismanagement has a bigger role in Iran's economic problems, "Our economic situation is currently more influenced by enforcing passive policies than by oil and the Central Bank sanctions".

Current situation

Rouhani's Administration says some 5,400 industrial units were closed during Ahmadinejad's presidency and 70 percent of industrial units worked at half-capacity, while Iran's Minister of Industry, Mine and Trade Mohammad-Reza Nematzadeh said in early 2014 that the employment rate in industrial sector is a negative 36 percent.

Before him, Iranian MP Alireza Mahjoub, who is the head of House of Labor, announced last year that some 100,000 labors were fired, while 80 percent of industrial production units faced "financial crisis".

Sabzlipur says that when production loses its valuable aspect, then economic growth rate decreases subsequently and unemployment, inflation and general price level will increase.

He mentioned the rise in gold and foreign currency's value against rials during the last weeks, saying that "an incorrect performance has led to people and market distrust of government's decisions. Consequently, it is natural that monetary assets are removed from market and they move toward dealership and aim at the sensitive and vulnerable points of economy. Moreover, liquidity present in market in competition with this phenomenon has expanded the agitation and with passive economic policies we witness a situation which neither the government nor people can tolerate it nor high expenditure caused by this situation is reached on catastrophic phase".

He believes that the present economy of Iran can be considered 20% better than during Ahmadinejad's term.

"The new government like during Ahmadinejad's time in office have started giving wrong and unreal statistics and by providing good statistics, they want to cover the failures, unrealized vows, etc.," he said, adding that there are many questions including how many factories were revived, what extent employment has occurred, what extent inflation (of course in practice not in theory) has decreased?

Dalga Khatinoglu is a specialist on Iran's energy sector and head of Trend Agency's Iran News Service

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