1 WB predicts 4.4 pc economic growth for Iran in 2016
The World Bank on June 8th released an annual report titled Global Economic Prospect, divergence and risks. The report has predicted that Iran’s economy will experience an economic growth rate of 4.4 percent in 2016, and believes that in spite of the existing supply glut, the positive impact of the country’s increase in oil output post-sanctions is already apparent in its economy. The institution also expects the country’s financial services, mineral and metals, and manufacturing industries be positively affected post-sanctions. Some parts of the report which pertain to Iran’s economy are summarized below:
Positive impact of increase in oil output: The upswing in oil production in Iran since the lifting of most sanctions is benefiting the domestic economy but is occurring in an environment of already high supply, including in other producers in the region. Positive impacts for the Iranian economy, particularly in the form of higher oil production, are already apparent. The easing of sanctions has opened the country to international trade and investment. In April 2016, Iran’s oil production was 3.6 mbd, which was 5% higher than average monthly production in 2015. The post-sanctions era also holds strong promise for the Iranian financial services, mineral and metals, and manufacturing industries
An economic growth rate of 4.4 percent in 2016: The main reason for the slight improvement in regional growth in 2016 is stronger activity in the Islamic Republic of Iran, the region’s second largest economy, which is forecast to grow 4.4 percent in 2016, up from an estimated 1.6 percent in 2015, following the removal of sanctions.
Some elements may put downward pressures on oil price in 2016: higher Iranian oil output will occur as other developments, including an announcement by Saudi Arabia in May to increase production in 2016 and the mid-April collapse of a draft agreement among major oil exporters to freeze production at January 2016 levels, may put downward pressure on prices.
EU’s exports to Iran may double post-sanctions: The impacts of Iran’s reintegration into the global economy through trade channels are more challenging to assess, but exports from the European Union to the Islamic Republic of Iran, for instance, stand to approximately double if they rebound to the levels seen prior to the tightening of sanctions in 2012. Countries neighboring Iran may benefit from increased trade links and travel.
As Iran reintegrates into the global economy, the country’s monetary authorities will need to keep inflation in line with the stated targets and unify the exchange rate regime (the latter of which is intended to be complete by the end of September), and to ensure banking sector stability.
2013 2014 2015e 2016f 2017f 2018f GDP growth -1.9 4.3 1.6 4.4 4.9 4.7 Russia gives Iran €2.5 billion in loan
Russian Deputy Finance Minister Sergei Storchak said the Ministry expects to get Cabinet permission in two weeks for granting two separate loans totally worth €2.5 billion to Iran, local Iranian media wrote on Monday. Russia Today (RT) has quoted Storchak as saying on June 6th that the allocation of the funds depends on contracts between Russian and Iranian companies. “Not all the risk can be
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Iran News Brief
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2 calculated at the development stage. Building railways is one example. The area is mountainous; the costs may increase or decrease.” RT reminds that in his Tehran visit in November 2015, the Russian president had promised providing up to $5 billion in state loans to Tehran to promote industrial cooperation. It also denotes that another €2 billion export loan would be granted to Iran by Russian state lender VEB.
“Russia and Iran have selected 35 priority projects in energy, port facilities, and railway electrification,”
wrote RT, explaining that among these projects is a €1.2 billion contract with Russian Railways to electrify 495 kilometers of railway, linking north-central Iran to the northeastern border with Turkmenistan. The three-year project will also include building 32 stations and 95 tunnels, significantly improving Russian transit through Iran.
Of note, Russian Energy minister Alexander Novak, accompanied by representatives of 40 companies as well as the president of Russian central bank had visited Tehran and met Iranian ministers of Petroleum, Energy, Road & Urban Development, Defense, and ICT. Creating a $5bn worth line of credit by Russia was among several issues the two sides agreed upon during that visit. Among other issues the two sides discussed or signed MOUs were increasing transportation, energy, banking and financial cooperation worth between $35bn and $40bn, including a $5bn worth agreement for developing Iran’s power sector, an $11-bn worth project for establishing the 2nd phase of the Bushehr nuclear power plant, and a $6-bn worth deal for the participation of ZarubezhNeft in Iran’s energy projects. Initial agreements were also reached for electrifying Iran’s railway system, establishing a joint bank, and launching a swap arrangement for Iran delivering oil and oil products on behalf of Russia to its Persian Gulf customers. At that time, the most successful talks were said to be in energy sector as they agreed the installation of two units of a 350-MW steam power plant in Bandar Abbas, renovation of a power plants built previously by Russia, synchronization of the two countries’ power grids, and cooperation on Iran’s deep waters.
The current level of Tehran-Moscow trade volume is $1.7 billion, which is hoped by their officials to grow to $10 billion in few years. The importance of Russia for the Islamic Republic is to such an extent that in August 2014, the Supreme Leader’s top foreign relations’ adviser said “China, Russia, and to some extent India, are of high strategic importance for us and we are determined to bolster ties them.”
The regional tense situation and the two countries’ strategic relations in Syria and Iraq have made them determined to extend their already political alliance to the economic realm. In most countries, economic relations are the foundations for political ties while in the case of Iran, it is vice verse as its economic relations get strengthened with the countries that it establishes warm political ties.
Income and life expenses of urban household according to CBI report
The Persian Language Iran newspaper on Thursday published the result of the CBI report on the average income and spendings of Iranian families in the Iranian year of 1393 (21 March 2014 - 20 March 2015). The report shows that the average annual expense of an urban Iranian household of 4 in 1393 was about 32.8 million tomans (equivalent to $9,475 per year1), while their earning averaged about 31.3 million tomans ($9,043).
1392
(March 2013 – March 2014)
1393
(March 2014- March 2015)
Percentage change Earnings 27.6 million tomans 31.3 million tomans ($9,043) 13.3%
Expenditures 27.5 million tomans 32.8 million tomans ($9,475) 15.6%
1 at the exchange rate of 3,470 tomans a dollar
3 Hence, the figures show that families in cities in 1393 spent about 5 percent more than their income.
The statistics of CBI also show that about 25% of urban household expenses were for food and beverages, 33.5 percent for housing and water and energy bills, and 10.4 percent for transport (see pie chart below). 1393 was the year in which Iran experienced an inflation rate of 15.6 percent, which although was much lower than the previous year of 34.7% rate, it was high enough to cause Iranian households to face a status in which their spending was more than their income.
Mehr News wrote 11 May 2015 that “the unbalanced distribution of opportunities and wealth in Iran has caused five million Iranian families have no employed member, and on another front, there are 129,000 Iranian families that have three or more unemployed members.” The news agency’s report was based on the statistics provided by the Statistical Center of Iran (SCI) which indicated that the number of employed members of Iranian families is less than one person (0.9 person), and that 24.1 percent of Iranian families have no employed members and the source of their earning is unknown.
There are conflicting reports about the exact number of jobless people in Iran. Speaking to lawmakers this Tuesday, Interior Minister Abdorreza Rahmani-Fazli put the figure at 3.5 million but according to the latest SCI census (2011), five million Iranians don’t have any job. On March 16 and in his meeting with François Charles Amand Fillon, the former French minister of Labor, Social Relations &
Solidarity, Iran’s Labor Minister Ali Rabiei had said about 4.5 million university graduates will enter the Iranian job market in the near future, and said French companies can use this human resource opportunity to increase their contribution to the Iranian economy.
Earlier on Feb 6th, Rabiei had said that achieving a single-digit unemployment rate in Iran will be accomplished by an annual economic growth rate of eight percent, and added that every percent of economic growth will create 100,000 new job opportunities, which requires at least 100 trillion tomans investment (about $28 billion).
food & beverages 25%
tobacco 1%
clothing &
footwear 5%
housing, fuel and water bills 33%
furnishing, house hold equipment...
4%
health 6%
transport 10%
communication recreational 2%
and cultural affairs 2%
education 2%
restaurents &
hotels 2%
miscellanous 8%
