Home Economy The Meaning of Iran’s Negative Economic Growth for the Eighth Consecutive Season

The Meaning of Iran’s Negative Economic Growth for the Eighth Consecutive Season

The meaning of Iran’s negative economic growth for the eighth consecutive season
The meaning of Iran’s negative economic growth for the eighth consecutive season

The Statistics Center of Iran has announced a negative economic growth rate in the spring of 2020, with and without oil revenues. The economic growth rate in Iran, including oil, has dropped to minus 3.5 percent and excluding oil to minus 1.7 percent.

According to a recent report by the Statistics Center of Iran, the gross domestic product (at a constant price in 2011) in the first quarter of 2020 has reached 1,656 trillion rials ($6.25 billion) with oil and 1,445 trillion rials ($5.45 billion) without oil. Last year, the center announced economic growth, including oil at minus 7 percent and without it at minus 6 percent. As usual, the Central Bank has announced other figures, and this conflict has been going on for decades.

Iran’s Economic Collapse

Consecutive Chapters of Negative Economic Growth

One of the reasons that economic indicators are calculated in the headings of a year is that if two consecutive chapters have a negative economic index, it indicates a recession in that sector or in the whole economy of that country. Therefore, recording positive growth in two consecutive seasons means getting out of the recession, while the spring of 2020 is the eighth consecutive season that the economy of Iran is facing negative growth. Negative growth means that the size of the economy has become smaller than before.

The inflation rates

A few days ago, the Statistics Center of Iran in a report had announced the inflation rate in August at 25.8 percent. Although the highest inflation is related to food items, including rice and cereals, and recently the price of eggs has risen sharply, the Central Bank in its report has announced an efficient increase in housing. According to this report, the price of one meter of a residential unit was announced at 230 million rials ($1,000) in the same month, which has increased both compared to last month and the previous year. This increase in housing prices has also been reflected in rental prices, which has increased by 31 percent compared to last year.

Red Light of Inflation Lit in Iran

In Which Areas Were the Recessions Observed?

In the report of the Statistics Center, the developments of the economic sectors have been examined and it is indicated that all the sectors were facing a recession. The group ‘oil and natural gas extraction’ with a negative growth of 14.3 percent is witnessing the largest decrease in value-added in the past two years.

The Statistics Center says the service sector has been severely damaged by the coronavirus and has fallen 3.5 percent. While in previous seasons it witnessed less negative growth. This setback is important in that the service sector accounts for more than half (at least 53%) of Iran’s total economy, and there have been many jobs in this sector that, as growth slows, will inevitably lead to lost employment opportunities.

Examples of services such as passenger transportation activities, cosmetics, cultural and religious activities, restaurants, home appliance sales centers, laundry facilities such as cloth laundry and carpet cleaning … and dozens of other jobs can be mentioned. The activity of this part of the service group has experienced negative growth of 63%.

The examination of the export and import sector in the spring indicates its very low performance. Export growth fell by 45 percent and imports by 66 percent. This reversal has had an impact on Gross Domestic Product (GDP) and the share of this sector has decreased from 24 percent last year to 14 percent this year.

Another sector that has reached a negative orbit this season is ‘net fixed capital formation’, which has been moving negatively for the past two years and has reached a negative rate of 2.8 percent.

Although in this chapter both statistical centers in the country (one with and the other without a license) acknowledge that economic growth is negative, the Central Bank is scrambling to show something else. Abdolnaser Hemmati, Governor of Iran’s Central Bank, said: “We are emerging from the Coronavirus recession. Point-to-point and monthly industry indicators show that we are coming out of the recession.”

The Research Center of the parliament claims that the two difficult years, 2018 and 2019 have passed. However, it admits that with the reduction of fixed capital formation, production capacity has decreased so much that it is no longer possible to achieve welfare as much as in 2011.

The report concludes: “Since the end of 2019, the coronavirus has put the Iranian economy in a state of recession with uncertainty. This has affected the decline in demand for Iranian products and the decline in domestic demand due to declining household incomes. On the other hand, the supply of the whole economy has been faced with a supply shock due to the disruption in the supply of raw materials. (Servat daily, 16 September)

Facts About Iran’s Economic Situation

The chairman of the Chamber of Commerce expressed his fear and anxiety about the staggering growth of liquidity and inflation: “This liquidity affects every day one market, coins, cars, dollars … The situation is really critical. Every morning when people wake up, their most important problem is what happens to the prices until the end of the day.” (Abrar daily, 16 September)