Iran’s economy grew at a rate of 3.8% in the first quarter of the current Persian calendar year (March 21–June 21), state broadcaster IRIB has reported, citing data from the Statistical Centre of Iran (SCI).
The economy appears to be making something of a recovery from the double shock of the coronavirus pandemic coming on top of the return of heavy US sanctions,
stepped up against Tehran since mid-2018. Lighter enforcement of sanctions by the Biden administration could be one factor assisting the recovery. Bumper oil and gas prices fetched on ‘under the radar’ markets amid the growing energy crisis could be another. Expanding trade with neighbours including Russia could also be driving growth.
Manufacturing was the best performing sector in Iran during the assessed sector, recording growth of 4.2% y/y, the SCI said. Services grew 3.9% y/y, while agriculture contracted 0.8% y/y, it added.
Separately, Iranian Supreme Leader Ayatollah Ali Khamenei has outlined the general scope of the country's seventh five-year national development plan (2022-2026), IRIB reported on September 12.
The plan sets average annual economic growth of 8% as a target, with a focus on improving the efficiency of all production factors, including human resources, capital, technology and management.
Iran's supreme leader has blamed the US and Israel for the protests that have swept the country for the past six weeks. In what were his first public comments on the unrest—which has morphed into anti-regime demonstrations, but was initially triggered by the death of 22-year-old Mahsa Amini who died in the custody of the Tehran “morality police” after being detained for allegedly breaking the Islamic dress code by loosely wearing a hijab, or headscarf—Ayatollah Ali Khamenei said "riots" were "engineered" by Iran's arch-foes and their allies. He gave his strong backing to the security forces.
The US will this week put the United Nations spotlight on the protests in Iran and look for ways to promote credible, independent investigations into Iranian human rights abuses committed during the unrest, Reuters reported.
Germany and the European Union, meanwhile, are assessing whether to classify the Guard as a terrorist organisation, German Foreign Minister Annalena Baerbock said on Sunday.
In Kyiv on October 28, a group of Iranians protested against the Iranian regime’s support for Russia in the Ukraine war. Tehran continues to deny accusations that it has sent hundreds of military drones to the Kremlin. The European Union and UK have hit Iranian military individuals and a weapons company with sanctions in response to what they describe as an Iranian delivery of kamikaze drones to Russia that enabled the Kremlin to conduct waves of air strikes on Ukrainian civilian and infrastructure targets.
Both the protests and the lack of optimism regarding any possible reinstatement of the JCPOA—and consequent lifting of US sanctions on the Iranian economy—are taking a toll on Iran’s economy, with the former prompting the authorities to bring in sweeping internet shutdowns that have paralysed much of the country’s digital economy.
Research indicates that 47% of Iran’s internet businesses have lost more than 50% of their income in recent weeks amid the Iranian regime’s unprecedented restrictions on internet access brought in to try and curb the nationwide protests that have taken place since mid-September.
The US on September 29 whacked Iran with a new round of petrochemical and petroleum sanctions. Throughout several months when there appeared to be a real prospect of Tehran agreeing a path to the reinstatement of the nuclear deal, or JCPOA—which would curb Iran’s nuclear development programme in return for the lifting of sanctions—Washington appeared to somewhat relent on the enforcement of existing US sanctions applied to Iran’s oil, petrochemical and various other industries. However, the calculus has changed. Iran is stubbornly resisting a “final draft” of a European proposal for bringing back the JCPOA, while it has grown closer to Moscow since Russia invaded Ukraine in February.
US Secretary of State Antony Blinken told reporters at Nato headquarters in Brussels on September 9 that Tehran's latest response in negotiations to restore the nuclear pact pushed the talks a step back. After 16 months of indirect talks between Tehran and Washington, the EU last month put forward a “final draft text” offer for reviving the JCPOA. On September 10, France, the UK and Germany said in a joint statement that they have "serious doubts as to Iran's intentions and commitment to a successful outcome on the JCPOA".
The Ukraine conflict has reportedly resulted in a surprising surge of trade flows from Europe to the East and South via Iran, which saw Iranian goods transit increase 52% in March and creates something of a political quandary for both the European Union and United States, as Iran, like Russia is also under significant US sanctions.
With sanctions still in place in an effort at keeping Iranian oil off world markets, Iran has been relying on China turning a blind eye to American demands to import substantial amounts of Iran’s crude on the grey market. Iran's oil export volume is running at a level 40% higher than was seen a year ago, according to the National Iranian Oil Co (NIOC).
Iran's gas export earnings for the first four months of the Persian calendar year (March 21 to July 21) reached nearly $4bn, higher by 580% y/y, the semi-official ISNA news agency quoted Oil Minister Javad Owji as saying on July 27. The Islamic Republic has expanded gas output significantly at South Pars in recent years and supplies are estimated to flow at an average of 850-950mn cubic metres per day, topping out at 1bn cubic metres.
Iranian President Ebrahim Raisi and Russian counterpart Vladimir Putin have voiced their wish to pursue de-dollarisation in global trade during Putin’s visit to Tehran on July 19. Raisi remarked on June 29 that an independent financial system would make it "impossible for any country to exert influence or pressure on it".
Meanwhile, Iran placed its first official import order using a cryptocurrency, Tasnim News Agency reported on August 9. Such orders could provide a way for Tehran to dodge US sanctions. The type of cryptocurrency used was not disclosed by officials. Using national currencies with the other Caspian states would further reduce Iran's reliance on dollars.
The Iranian rial (IRR) has fallen to a record low against the dollar amid the global surge in the US currency, more than two weeks of anti-regime protests and the failure of Tehran and the major powers to find a path to a revival of the 2015 nuclear deal, or JCPOA.
The rial closed on the Tehran market at a worst-ever rate of IRR332,500 to the USD on October 3 as the US currency continued to surge past its rivals, cementing its place as the global bastion of financial security amid wobbling world markets.
Iran’s official annual inflation rose 13.2 pp to a record 52.5% in June from 39.3% in May, the Statistics Center of Iran (SCI) announced on June 28.
Price growth in food, beverages and tobacco grew by 32.2 pp to 81.6% in June, while nonfood goods and services prices moved up by 2.8 pp to 36.8%.
Social tensions in Iran have risen amid surging inflation, including steep hikes in food prices, and a series of strikes mounted by workers including teachers and bus drivers in Tehran.
Protests over water scarcity in Iran have become quite commonplace in the past two or three years, with the impacts of climate change combining with questionable water management to leave many regions exposed to a severe lack of water, especially given persistent drought that is afflicting the country.
Iran’s energy ministry has warned Tehran could suffer water shortages in coming weeks with reservoir levels at historic lows amid a third consecutive “dry” year, local media reported on October 24.
Dwindling water supplies meant rationed water use might become necessary if consumption continued at current record levels, officials said.
Looking ahead, the World Bank in its revised estimate expects growth at 2.9% in 2022 and 2.2% in 2023. Nonetheless, the institution observed the threat that drought poses to Iran as well as the economic disruption caused by the nationwide anti-regime protests.
Ukraine may suffer one of the worst falls in GDP after a war, the European Bank for Reconstruction and Development (EBRD) predicts in its 2022/23 Transition Report.
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