Garrett Nada
The biggest news in October was President Hassan Rouhani’s announcement that oil revenues have been slashed 30 percent. The cut is due in part to the falling oil price, now at about $85 a barrel, the lowest since 2012. Iran is largely dependent on crude oil exports, which account for nearly 80 percent of Iran’s foreign revenue. So the fall in price has placed even more pressure on Rouhani’s government to secure a nuclear deal that will lift wide-ranging economic sanctions on Iran.
The economy, however, is still projected to grow 2.2 percent in 2015, according to a new report released by International Monetary Fund. The interim nuclear deal, which was implemented in January, has enabled Iran to repatriate foreign oil revenues held overseas. In October, India transferred a $400 million oil payment to Iran’s central bank.
Also in October, a flurry of statistics was released due to the close of the first half of the Iranian calendar year (March 21 to September 22). Some findings suggested that sectors of the economy are slowly recovering. For example, 400,000 Iranians reportedly found jobs and 520,000 vehicles were produced, nearly a 75 percent increase compared to last year. Iran’s oil and non-oil exports were also up compared to last year.
But many people are still struggling to make a living. Seven million Iranians, about eight percent of the population, are living in extreme poverty, according to Minister of Labor, Cooperatives and Social Welfare Ali Rabiei.
Another significant development was Boeing’s sale of aircraft manuals, drawings, navigation charts and data to Iran Air —the first acknowledged deal between U.S. and Iranian aerospace companies since the 1979 U.S. hostage crisis. The sales, however, only generated $120,000 in revenue and $12,000 in net profit in the quarter. The following is a run-down of the top economic stories with links.
Domestic Developments
Inflation: President Hassan Rouhani said
inflation will fall below 20 percent by the end of the current Iranian calendar year (March 20, 2015). “Iran’s average monthly inflation increase was around 3 percent in the last year of the previous administration. But now the average monthly rise is around one percent,” he noted in a live television interview. Inflation is now at about 21 percent. “We are containing the inflation, and simultaneously snapping economy out of recession,” said Rouhani.
Economic Projections: Iran’s economy is projected to
grow 2.2 percent in terms of real gross domestic product in 2015, according to The International Monetary Fund’s World Economic Outlook for October. In April, the group had predicted a growth rate of 2.3 percent.
Iran’s economy is projected to grow by three percent this year, according to the governor of Iran’s Central Bank, Valiollah Seif. “The economic situation in Iran is on the mend,” he said in an interview with
Bloomberg. “The economic program we have right now is based on the fact the sanctions will continue, so this is a given assumption,” said Seif. “Naturally, if sanctions are removed, we would experience much better results.”
Employment: Some 400,000
jobseekers found employment during the first six months of the current Iranian year (March 21 to September 22), according to President Rouhani’s advisor for supervision and strategic affairs, Mohammad-Baqer Nobakht.
Iran needs to create 8 million
new jobs in the near future to employ those currently out of work, according to Iranian Minister of Economic Affairs and Finance Ali Tayebnia. The workforce is expected to grow from 22 million to 25 million within seven years, which will require the creation of 13 million new jobs, according to the Ministry of Labor, Cooperatives, and Social Welfare.
Poverty: Some seven million Iranians, about eight percent of the population, are living in extreme
poverty, according to Minister of Labor, Cooperatives and Social Welfare Ali Rabiei. “The poverty is linked to gender too, such that women breadwinners are twice more likely to live in poverty compared to men,” he said at a conference on development and education equality. Rabiei warned that urban poverty has been on the rise for the past decade. He also announced that the government will introduce programs for eradicating illiteracy, one for people under age 30 and one for older adults.
Living costs: The prices of some staple foods in Iran have risen significantly since last year, despite the Rouhani administration’s efforts to stabilize inflation. The price of milk has risen 28 percent and the price of eggs has risen 24 percent, according to one Tehran resident interviewed by the
Financial Times. Official statistics show that food prices have generally risen 6-12 percent since last year.
The
living cost of an urban household in Iran was about $18 million rials or $560 per month during the first quarter of the year, according to a survey conducted by the Statistical Center of Iran. The living cost for a rural household averaged about $340 per month.
Banking: International banks are still
avoiding dealing with Iran for fear of violating U.S. and E.U. sanctions. They are even shying away from processing humanitarian deals, according to Tehran-based Middle East Bank’s chief executive, Parviz Aghili. "Going through a very simple process of opening letters of credit for the importation of goods, even humanitarian goods, has become much more difficult and a hassle," Aghili told Reuters.
Tourism:
Automobiles: Iranian automakers produced more than 520,000 vehicles in the first half of the Iranian year, a 74.3 percent rise compared to the same period last year, according to the
Financial Tribune.
Steel: Iran’s
steel production during the first nine months of 2014, 12.1 million tons, increased by six percent compared to the same period in 2013, according to state news.
International News
Foreign Trade: Iran’s foreign trade volume
grew 22 percent to more than $53 billion during the first six months of the Iranian calendar year, according to the head of the Trade Promotion Organization of Iran, Valiollah Afkhami-Rad. In an interview, he projected foreign trade to reach $110 billion by March 2015. So far, Iran’s major exports included propane, methanol and bitumen. The main destinations for goods, in descending order, were China, Iraq, the United Arab Emirates, Afghanistan and Turkey.
Oil, Petrochemicals and Natural Gas: Crude oil revenues have been
cut by about 30 percent, according to President Rouhani. “We have to deal with the new conditions and the global economic conditions. In the issue of oil, the economy has not been the sole important factor and international politics and plots have been also involved,” he told parliament, likely referring to the drop in oil prices worldwide.
Iran
exported 7.8 million tons of petrochemical products worth some $5.1 billion during the first half of the Iranian calendar year, according to the National Petrochemical Company’s production manager, Ali Mohammad Bosaqzadeh. The value of the exported products increased by seven percent compared to last year.
Supreme Leader Ayatollah Ali Khamenei warned against relying on oil revenues. “Iran should be managed through reliance on its internal forces and the resources on the ground, meaning the youth's intelligence and talent, and production of science and knowledge and if so, no world power can turn the country's economy into a plaything,” he said on October 22.
Iran
exported $6.5 billion worth of natural gas condensates during the first half of the current Iranian calendar year (March 21 to Sept 22). The amount represents an 85-percent increase compared to last year.
Non-Oil Exports: Iran
exported $16.7 billion worth of non-oil goods during the first half of the current Iranian calendar year. Exports to Asia, which accounted for 93 percent of total exports, increased by nine percent in comparison to the same period last year. And exports to Europe increased by 33 percent.
The government plans to
boost non-oil exports to $61 billion in value by March 2015, according to the deputy chairman of the Trade Promotion Organization of Iran, Yaghmour Gholizadeh. The Islamic Republic actually registered an overall trade surplus of some two billion dollars between March and September 2014.
Non-oil exports from Shahid Bahonar Port in Bandar Abbas
increased by 231 percent during the first half of the Iranian year compared to the same period last year, according to an official from the ports and maritime organization.
European Union: The value of Iran’s
exports to the European Union increased by 77 percent in August 2014 compared to August 2013. The value of the goods reached $102 million, according to Eurostat. The total trade turnover from January to August 2014 between Iran and the 28 E.U. member states totaled $5.8 billion.
Boeing: Boeing, a U.S.-based aerospace and defense company,
announced that it sold aircraft manuals, drawings, navigation charts and data to Iran Air. The sale marked the first publically acknowledged transaction between U.S. and Iranian aerospace companies since the 1979 U.S. hostage crisis. The sales generated some $120,000 in revenue and $12,000 in net profit in the quarter.
Ease of Doing Business: Iran was ranked 130 out of 189 economies by the World Bank in its new Doing Business
report, two positions higher than last year. The report measures regulations affecting 11 areas of the life of a business. Iran ranked 62 for starting a business, 89 for acquiring credit and 172 for obtaining a construction permit.
Iraq: Iran
exported some $5.5 billion in technical and engineering services and other commodities to Iraq between March and September 2014, according to the head of the Iran-Iraq joint chamber of commerce, Jahanbakhsh Sanjabi Shirazi. Iran’s Export Development Bank allocated $300 million to further boost exports to Iraq.
India: India
transferred a $400 million oil payment to Iran’s central bank via the United Arab Emirate’s central bank. Under the interim nuclear deal that took effect in January, Tehran received $4.2 billion in blocked funds across the world. Iran was later granted access to another $2.8 billion, of which some $1.4 billion has been repatriated.
Turkey: President Rouhani reiterated Iran’s determination to boost its
trade with Turkey to $30 billion by 2015 in a meeting with Turkish Ambassador to Tehran Reza Hakan Tekin. Bilateral trade value in the first half of 2014 totaled $6.5 billion, according to the Turkish Statistical Institute.
Germany: Michael Tockus, chairman of the Germany-Iran Chamber of Commerce,
pledged to continue enhancing trade relations between the two countries, irrespective of the outcome of nuclear talks between Iran and the world’s six major powers. “The present improving trend will continue even if there will be no change in the West's economic sanctions against Iran,” he told reporters in Berlin.
United Kingdom: A group of Iranian businessmen hosted a
forum in London on E.U.-Iran trade relations. The purpose of the event, held in cooperation with the
European Voice newspaper, was to “evaluate the post-sanctions trade framework and investment opportunities.” No current U.K. or E.U. officials participated. But former British Foreign Secretary Jack Straw and former French Foreign Minister Hubert Védrine attended. And U.K. and U.S. officials reportedly attended as observers, according to
Asharq Al-Awsat.
