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Iran’s Economy in Decline: Economic Analysis

Posted by Zand-Bon on Feb 3rd, 2010 and filed under News, PLANET IRAN NEWS FOCUS, Photos. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Economic index report for the second quarter of Iranian solar year 1388 (equivalent to 3rd quarter of 2009) was published yesterday.

By:  Seyed Mohammad-Sadegh Alhosseini

February 1, 2010


This quarterly report on the economic condition in the country contains some important points [to note]. Firstly, the report shows the country’s economic situation and direction in every quarter. Secondly, it moderates the expectations of the readers and economists with respect to real economic changes. That is why the report is considered a credible source for an economic evaluation and analysis. This report, like the World Bank’s report, does not portray a pleasant picture of the country’s economic state and activities.

The analysis presented in the latest edition of the report:

1) Economic growth: Finally, Iran’s rate of growth for 1387 ( Spring 2008-end of winter 2009) was officially announced. Based on the report, Iran’s Central Bank has announced the gross rate of growth in this period to be 3.2%. The growth rate is calculated by finding the sum of the Gross Domestic Product (GDP) of this year and the previous year, and dividing it by the GDP of the year in question. However, the data for Gross Domestic Product in 2008 is, unexpectedly, absent from the report. Instead, it reads “data is not available” in front of the GDP. If the growth rate is properly calculated, the GDP (the source of the calculations) should also be mentioned in the report, as it was in previous years. If the data for GDP is not available, then how was the rate of growth obtained? If the GDP is known, why is it absent from the report?

In previous years, the economic rate of growth announced by Iran’s Central Bank has not been significantly different from that reported by credible international institutions such as the World Bank. However, the rate of growth announced in this year’s report (i.e. 3.2%) is drastically different from the rate of 1% reported by the World Bank for Iran’s economy in 2009. Of course, minimal differences in these two rates is natural (given the difference between the Iranian and Western calendars- the Iranian solar calendar starts on March 21st, the first day of spring, instead of January 1st), but a difference of such a degree raises concerns when the GDP has not yet been announced.

2) Unfortunately, the statistics and data index for capital, industry (Index of Industrial Production), and stock exchange (Buyer’s Index) is also absent from the report. This report, like the number 56 edition (on 2009’s second quarter), lacks many of the 2008-2009 indicators. This finding has raised many questions among economist and has resulted in a refusal or inability to analyze Iran’s economy. It is unacceptable that an organization responsible for providing economic statistics (such as the Central Bank) is unable to do so because there is a lack of data. The officials have to be warned about the grave economic consequences of not presenting [complete] statistics.

3) In the housing sector, the trend of declining building permits continues. The number of permits issued in the second half of the year is 2,265 in Tehran and 29,449 in the rest of the country. The numbers show a decline of 64.9% and 37.5% in the first two months of the second half of the year. This indicator had shown a 62% decline for Tehran and a 36% decline in the entire country for the first quarter. As mentioned before, the decline in the number of permits issued can result in a shortage in the housing supply in the coming year. This can be very dangerous for the housing market given the age structure of the country (2012 is named the year of the demand for houses, because the amount of new marriages is expected to increase, thus increasing home sales).

4) In a rare occurrence, the data in the industrial sector shows that the number of permits issued for industrial units has declined for the second year in a row. The figures show a decline of 11.3% in 2007 and an unprecedented drop of 45.7% in 2008. This index, like the indicator for the number of building permits issued, is another forecasting indicator which unfortunately does not present an optimistic view of Iran’s future economy.

5) Production and export of oil in 2008 and the second quarter of 2009 has declined. Although the decline in this indicator is small, it can reflect an undesirable situation with respect to investment and development in oil fields.

The collection of the data presented above shows that Iran’s economic situation, based on the Central Bank’s statistics, is bleak. Furthermore, the rate of growth for the country was forecast to be 4.8% in 2008. The reported rate of growth of 3.2% shows that the bell has started to toll for the Iranian economy.

Translation by: Siavosh J.

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