IMF Report on Iranian Economy

The International Monetary Fund today released its report on the recent economic conditions in Iran.

“Macroeconomic performance worsened markedly following the implementation of the subsidy reform in late 2010 and the intensification of sanctions in 2012.

“Since the Presidential election in mid-2013, there have been some signs of stability,” the report said.

Following are the report’s highlights:

• The economy contracted by 5.8 percent in 2012/13 (Iranian calendar year 1391). In 2013/14, it is estimated that the economy contracted by 1.7 percent. The economic activity, however, would begin to stabilize in 2014/15, with the GDP projected to grow 1-2 percent. However, the current outlook remains uncertain and subject to downside risks.

• The 12-month inflation rose from about 12 percent in late 2010 to around 45 percent in July 2013. But after the Central Bank of Iran (CBI) tightened credit to the banking system, putting a lid on money growth, inflation began to decline and stood at 29 percent in January 2014, with the estimated inflation rate at the end of 2013/14 period (March 2014) standing at 22 percent. 

• Unemployment was at 12.2 percent in 2011/12 and 2012/13, but it is estimated that it rose to 12.9 percent in 2013/14.

• Narrow money (M1) declined from $29.1 billion in 2012/13 to an estimated $20.5 billion in 2013/14. Broad money (M2) declined from $30.6 billion to $24.9 billion in the same periods.

• Gross official reserves of CBI rose from $104.4 billion in 2012/13 to an estimated $107.7 billion in 2013/14.

• Crude oil exports decreased from 2.5 million bpd in 2011 to about 1 million bpd in 2013.

To read the entire IMF report, please click here.

IMF Reports on Iran Economy

Small Contraction and Rising Inflation in 2012

The Iranian economy has shown a small contraction because of oil sanctions whose impact is spilling over into other sectors, the IMF said today. The projection also shows rising inflation in the country.

“The projection that we have shows small contraction in Iran economy during 2012 ... and an increase in inflationary pressure in the same period,” said the IMF’s director of Middle East and Central Asia, Masood Ahmed. (AFP, 11 Novemebr)

Mr. Ahmed made the remarks during his presentation of IMF’s Regional Economic Outlook on Sunday in Dubai. The contraction will be just under 1 percent in 2012.

“This deterioration reflects both lower oil production, which is in part because of the external constraints and the spillover impact of that on the rest of the economy,” Ahmed said.

IMF estimated Iran’s oil exports to have dropped to 1.25 million bpd this year compared with 2.14 million bpd last year.

Mr. Ahmed added, however, some sectors of the Iranian economy, such as agriculture, have done well. Iran, he pointed out, is not as dependent on oil as other oil exporting countries, with agriculture contributing some 10 percent of the GDP. He cautioned, however, that his projections have not take into account the sharp depreciation in Iran's currency, the rial.

“These projections were done before the very significant depreciation of the currency and the related increased uncertainty, which will likely have a further negative impact on the economic performance in the year ahead,” Ahmed said.

The IMF put Iran’s inflation this year at 25.2 percent, compared with 21.5 percent last year.

Iran's Official Inflation Rate: 19.6%

Statistics Center of Iran (SCI), the government’s statistics and census organization, reported today that the annual inflation rate in Iran for the period ending in Iranian calendar month of Tir (21 July) hit 19.6 percent [Fars News Agency, 18 August]. On Monday, the Central Bank of Iran had reported that the annual inflation rate had risen to 16.3 percent.

SCI Director General Mousalreza Servati told Fars News that the country’s fifth development plan, the current five-year economic plan, has authorized SCI as the sole authority for official statistics and the Central Bank should not have published its inflation report on Monday. The 19.6 percent rate is then the official rate of inflation in the country.

The inflation rate announced by SCI today is in sharp contrast with the latest IMF economic report on Iran, published earlier this month, that had put the rate at 12.4 percent. The huge difference in inflation rates is expected to undermine the accuracy of the entire IMF report.

SCI also announced that it will soon publish the GDP growth rate for 1389, the latest Iranian calendar year, but said it expected it to be around the same rate as the previous year, 1388. The problem is the government has not yet published 1388 growth rate, but the governor of the Central Bank has previously talked about a 3.5 percent growth rate for that year.

Iran's Inflation Rate Hits 16.3%

Subsidy Reform Program Contributing to Rapid Rise in Prices

The Governor of the Central Bank of Iran (CBI) Mahoud Bahmani said today that Iran's annual inflation rate for the period ending in Iranian calendar month of Tir (21 June 2011) hit 16.3 percent. The inflation rate in Tir increased by 0.9 percent compared to the previous month [Mehr News Agency, 15 August].

Earlier this month, IMF had praised Iran’s successes in containing inflation in the aftermath of government subsidy removals, keeping it at around 12.4 percent. But today’s announcement by the CBI governor questions IMF’s assertion as too hastily made.

Iran’s economic reform program that started in late 2010 will remove $60 billion in government subsidies a year, or 15 percent of the country’s GDP. The government, however, is paying out nearly $30 billion a year in cash to the great majority of the citizens to cope with the rapidly rising prices that have followed subsidy removals. Even though the subsidy removals would significantly increase the efficiency and competitiveness of the economy, the monthly cash payments are becoming a major cause of inflation.

Iran Rejects IMF Report on Economic Growth

Iranian Minister of Economic Affairs and Finance Shamseddin Hosseini today rejected the latest IMF forecast on Iran’s economic growth, calling it “illogical and surreal.” The International Monetary Fund had reported earlier that Iran's economic growth in the year 2011 will fall to zero percent.

“The figure released by the International Monetary Fund is mostly based on the assumption that the West's measures against Iran have affected our economy,” Hosseini said [ISNA, 25 April].

Hosseini did not offer his own forecast on the country’s economic growth rate. Since 2009, the Central Bank of Iran (CBI) has stopped publishing its annual reports on the country’s economic growth rate, making the IMF reports the only source of information on the actual and forecasted growth rates.