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Sanguine 6 Percent Growth Projected by Iranian Gov’t

Labor protest in Tehran, Undated.

The Iranian government projects 6 percent economic growth for the next Persian calendar year starting March 21.

The country’s economy will grow by 5.8 percent including income from oil exports and 6 percent excluding oil income, government spokesman Mohammad Bagher Nobakht announced Jan 23.

These growth predictions are very optimistic when compared with those projected by international institutions. In a report published in November 2017, the International Monetary Fund (IMF) projected 3.8 percent growth for Iran’s economy in 2018, slightly lower than the 4 percent forecast by the World Bank in its recent report on Global Economic Prospects published in early January.

The World Bank’s figures show a 0.4 percent increase compared to the previous year.

“Besides the effect of a slowdown in its oil sector following an exceptionally high 2016 surge, activity in the Islamic Republic of Iran was dampened by weak foreign investor confidence associated with geopolitical tensions (including new sanctions and a hardened nuclear-deal stance by the United States),” the report said.

The World Bank also projected 4.3 percent growth for Iran’s economy in 2019 and 2020, adding that Tehran will experience “higher investment growth offset by lower oil production and limited access to finance.”

In another sign of Iran’s dire economic conditions, the spokesman of the budget reconciliation commission announced on January 23, that the Supreme Leader ayatollah Ali Khamenei has authorized the expenditure of $4 billion of Iran’s National Development Fund for other needs, including 63% of the money for military purposes.

This will not resonate well with the people who just a few weeks ago poured into streets protesting economic hardship.

Mehrdad Emadi, an Iranian economist residing in the UK, believes Iran’s economy has little chance of living up to the government’s ambitious projections.

"Although oil prices will be higher this year and next, oil prices are not a determining factor for economic growth anymore due to skyrocketing government expenses, bureaucracy, and inefficient governing,” Emadi told Radio Farda in an interview.

President Donald Trump's threat to pull out of the nuclear agreement with Iran if its “flaws” are not addressed by European countries, and the risk of new sanctions against Iran due to its ballistic missile program and its military activities in the region are other factors Emadi says create further obstacles for Tehran.

When submitting his budget bill for next year to the parliament, President Hassan Rouhani said his government’s goal is to have economic growth above 5 percent. The growth is necessary to create more jobs.

Based on IMF statistics, Iran’s unemployment rate was 12.4 percent in 2017 and will remain the same in 2018. It is, however, important to note that the IMF unemployment figure is based on data provided by the Iranian government, which considers anyone working at least one hour per week to be employed.

But even if Iran achieves a growth rate higher than 5 percent, it will fall short of the necessary pace to alleviate high unemployment. Both independent economists, and recently Iranian officials, have said that the country needs consecutive years of 8 percent growth to be able to make a meaningful dent in its unemployment numbers.

The rate of economic growth is extremely important for regime, as the recent anti-establishment protests in dozens of Iranian cities showed that a large portion of the population is deeply dissatisfied with the economic situation and their quality of life.