The International Monetary Fund (IMF) has projected that Iran’s economic growth rate will drop from 12.5 percent in 2016 to 3.5 percent and 3.8 percent in 2017 and 2018, respectively.
According to the latest IMF annual report released on October 31, Iran revised its 2016 GDP growth from 6.5 percent to 12.5 percent as a result of methodological changes in its measurement; however, it will drop in the current year as the boost to oil output after the lifting of sanctions wears off.
In this case, the sudden statistical shift from 6.5 to 12.5 percent was accepted by IMF, but economists outside Iran take the country’s official economic data with a grain of salt.
Even Supreme Leader ayatollah Ali Khamenei has questioned the government economic figures, saying that it does not reflect the real living conditions of the people.
Following the nuclear deal with world powers and the lifting of international sanctions against Iran that occurred in January 2016, Tehran has been able to increase its oil exports drastically from less than 1 million barrels a day in November 2015 to a six-year high of nearly 2.9 million barrels daily in February 2017.
But the third oil producer in the Organization of Petroleum Exporting Countries is struggling to keep up the trend due to technical difficulties and outdated facilities. Low oil prices and conflict in the region were other factors with a negative economic impact on countries in the Middle East, including Iran, the IMF said.
Based on its report, oil exporters in the Middle East and North Africa will face cumulative budget deficits of $320 billion over the next five years due to lower oil prices, but Iran will be among those with a deficit of less than 5 percent of GDP in 2016, while the figure will exceed 10 percent for others.
The IMF attributed the trend to the fact that Iran has decreased its dependence on oil revenues, adding that the main source of deficit financing for countries such as Iran, Iraq, Libya, and Yemen remains debt issuance since external financing options are limited.
However, according to the IMF, Iran’s banking system is weak and requires recapitalization and restructuring. A top Iranian banker recently said that at least half of the banks in Iran should either close or merge over the next six years.
Parviz Aghili, a former HSBC banker, said Iran’s banking industry is clogged with toxic loans and needs modernization.
The IMF report also shows that inflation in the consumer price index in Iran -- which was more than 18 percent between 2011 and 2013 -- dropped to 9 percent in 2016 and will only increase 1.5 percent and 1.1 percent in 2017 and 2018, respectively.
Iran’s unemployment rate was 12.5 percent for 2016 and will see only a slight decrease to 12.4 percent in 2017 and 2018, the IMF said, although it hailed Iran’s efforts to align the education and training system with the needs of employers by the introduction of entrepreneurship courses in school curricula, among other things.
Iran’s unemployment figures are another example of potentially questionable data, but international economic watchdogs go along with Tehran’s official numbers.
Iran considers one hour work weekly as employment and says it has around 3.5 million unemployed, while the real figure of those not having meaningful employment is much higher.