By Haniyeh Sadat Jafariyeh

The GDP debate

December 23, 2016

On December 17, the Central Bank of Iran (CBI) put the growth of gross domestic product (GDP) for the first half of the current fiscal year (started March 20) at 7.4 percent, compared to the same period last year.

According to CBI Governor Valiollah Seif, economic growth for the first quarter of the year stood at 5.4 percent and jumped to about 9.2 percent for the second quarter.  

Finance and Economic Affairs Minister Ali Tayyebnia said on December 18 that Iran has witnessed a positive economic growth in various sectors, including agriculture and industry, and that the administration is following up on different plans to give a boost to activities in the housing sector.

However, these official data have been argued and have raised challenges.

Some economic experts strongly believe that the 7.4- percent growth cannot be translated as economic prosperity, growth in production, or job creation. More importantly, it is not felt in people’s daily life and does not indicate any sign of improvement in their purchasing power. They openly accuse President Rouhani’s administration of publishing such an ‘unrealistic figures’ in the last months of its tenure to boast about its achievements and take advantage of it prior to the next presidential elections in May 2017. 

“Economy relies on figures and when statistics are influenced by political reasons, they become fictional,” Tasnim news agency quoted Bijan Abdi, an economic expert and university professor, as saying.

Pedram Soltani, the vice president of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA) was quoted by Mizan online news agency as saying that the announced growth rate cannot be interpreted as a ‘balanced growth’ [i.e. other variables like the capital stock, real GDP, and output per worker have not grown]. Most of the growth was shouldered by the oil sector and the increase in Iran’s oil production while other sectors did not experience a positive growth. 

Critics argue that the Rouhani administration has tamed Iran’s rampant inflation at the price of deepening recession and a tangible decrease in domestic production and that the administration seeks to persuade people that it has met its promises about reaching a notable economic growth and controlling inflation as of taking office [in August 2013]. 
“While the unemployment rate is ever-increasing, people’s income is falling and producers are not enjoying the conditions, the announced economic growth does not seem to be real,” Fereydoon Safarkhanloo, an expert on economy and insurance, told Mehr news agency. “In economic growth, quality is more important than quantity and regarding the current stagflation in Iran, the reported growth rate seems to be quantitative and impressed by political considerations,” he added.
Since, in Iran, two separate state-run organizations- the CBI and Statistical Center of Iran (SCI) - are in charge of releasing periodic statistics on macroeconomic indices, which often differ from one another, critics unanimously call for the administration to publish statistics and detailed information about growth rates in various economic sectors to provide a vivid view of the country’s economic status.
Economic experts are perplexed while making calculations and analyses and do not know if they should rely on the SCI’s data or on that of the CBI, Tasnim cited Shargh daily quoting Masoud Movahhedi, the deputy industry minister. 

Debates over the issue were hot when the International Monetary Fund (IMF) made a statement on December 20 predicting a 6.6-percent economic growth for Iran in 2016 and 2017. “Higher oil production and exports, after implementation of the Joint Comprehensive Plan of Action should allow real GDP growth to rebound to 6.6 percent in 2016/17,” according to the statement,” the IMF report said.

It is also worth mentioning that besides the IMF report –which to some extent corroborates the administration’s data, the parliament research center in its report on the country’s economy in the first quarter of the current year and a prediction on the annual economic growth, published in September, highlights the implementation of the nuclear deal as the main reason for the current year’s economic growth. The report refers to increase in exports, reduction in monetary transaction costs, expansion in economic ties, and rise in foreign investment, as the other factors justifying the economic growth.

In this line, the Tehran Times conducted an interview with Kamran Nadri, an economist and a university professor, to attain a brighter view over the issue. Being asked for his opinion about the authenticity of the announced 7.4-percent growth rate, he insisted that it would not be reasonable to consider political purposes for the announced figure. 

“The obtained growth in the first quarter of the current [Iranian] year highly depends on the growth in [Iran’s] oil income, i.e., oil production and its added valued which continued to the second quarter as well, and also the growth in agriculture sector,” he said, confirming the growth rate reported by the CBI. 

“Furthermore, in this time span, the year-on-year inflation rate was at the lowest level and the figure is predictably to increase in the second half and in my view the average inflation rate will hit 9 percent by the yearend,” he added.

“Factors related to the economy in the first quarter, oil and agriculture sectors besides the lower inflation rate, could also propel its engine in the second quarter,” he clarified, “while in summer, economy could enjoy the results gained from ‘expansionary policies’ that the administration adopted in the last months of the previous [Iranian] year to protect small and medium-sized industries via providing them with financial support and so on.”  

“However, the growth should not be expected to resist during the third and the fourth quarters and will drop from the 9.2-percent growth of the second quarter, since oil production will not rise due to the agreement made within OPEC members, and the agriculture sector will not register growth in cold seasons,” Nadri explained. “But the measures taken to back the industry sector will continue to bear fruit,” he added. “Therefore, the reported 6.6-percent growth by the IMF for 2016-217 seems realistic, and I assume that Iran will witness an economic growth of around 6 percent for the current [Iranian] year,” he concluded.

HJ/MG
 

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