Economic Outlook

Economic Outlook

Overview

The Islamic Republic of Iran is a country in the Middle East (West Asia) and is bordered on the north by Armenia, Azerbaijan, Turkmenistan, Kazakhstan and Russia, on the east by Afghanistan and Pakistan, on the south by the Persian Gulf and the Gulf of Oman, on the west by Iraq and Kuwait and on the northwest by Turkey. Iran is divided into five regions with 31 provinces (Ostān), each governed by an appointed governor (Ostāndār). The provinces are divided into counties (Shahrestān) and subdivided into districts (Bakhsh) and sub- districts (Dehestān).

Population

According to Iran population and housing census, Iran’s total population was 79.93 mn of which 40.50 mn were men and 39.43 mn were women, also 74.1% are urban and 25.9% are rural in the year ended March 2017. The population growth has had a downward trend and reached from 2.46% during 1986 – 1991 to 1.24% in 2011- 2016.


Languages, Ethnic groups & religions

Iran official language is Persian (Farsi) and the others include Indo-European languages and ethnicities In terms of religion, the majorities 89% of the population are Shi’a, with 10% of Sunni and the remaining 1%. The Persian and Azeri people contribute the largest ethnic groups. Persians account for 61% of the population, followed by Kurds (10%), Lurs (6%), Balochs (2%) and the remaining 21% including the Azeri (16%), Arabs (2%), Turkmens and Turkic tribes (2%), as well as Armenians, Assyrians and Georgians.

GDP & economic growth

According to the Central Bank, the GDP amounted to 3,539,000 bn IRR (constant prices; 2012), from April to September 2017 and the economy experienced 4.5% growth. The International Monetary Fund (IMF) predicted that GDP growth will reach 4.2% in the year ending March 2018 and given the financial sector reforms, this trend will even increase to 4.5%, in the medium run.


Inflation

Currently, the increasing of production cost and aggregate demand are among the main determinants of inflation. The average inflation rate has reached 9.9% from April- December 2017. The International Monetary Fund forecasts Iran’s inflation rate to be 10.529% and 10.1% in 2017 and 2018.

Employment & unemployment

In the year ended March 2017, Iran active population was approximately 25.8 mn, which 22.6 mn were employed and the remaining 3.2 mn were unemployed. The unemployment rate was 12.5% in the year ended March 2017 and the IMF predicted Iran’s unemployment rate to be 12.4%, in 2017 and reach 12.2% in 2018.

Foreign trade

The non-oil export amounted to 88,576,000 tons, 31,640 mn USD, down by 6.9% in volume and 2.4% in USD value, from April to December 2017. The import volume reached 26,595,000 tons and reached 37,570 mn USD, by 5.8% in volume and 18.3% in USD value compared to the same period of last year.


Foreign investment

European and Chinese countries have had an increasing investment in Iranian markets overthe past two years, so that the amount of FDI was 8 bn USD, by various countries with China having the most share from April to November 2017.


Financing agreements

Seven foreign countries have signed financing agreements with Iran for 40 bn EUR in the post-JCPOA period. China, South Korea, Italy, Russia, Austria, Denmark and India have respectively allocated the highest credit lines to Iran.

Monetary base and liquidity

From April to October 2017, liquidity and monetary base were equal to 14,030,000 bn IRR and 1,946,000 bn IRR, respectively which grew by 23.3% and 18.3% year-on-year. The money and quasi money share of liquidity was 11.7% and 88.3%, in the same period. The increase in liquidity in the year ended March 2017 was due to a synchronic increase in the monetary base and liquidity coefficient.

Budget

The total budget in the year ended March 2019 budget bill has a growth by 3.7%, compared to the year ended March 2018 budget act.

GINI index

The income distribution of households indicates that Gini coefficient has increased in urban and rural households to 0.40 in the year ended March 2017,versus the highest since 2003. The status of the class distinction has risen more than previous years.

Stock exchange index

The Iranian stock exchange market grew significantly between November and December 2017, the main reason of which was the growth of metals and minerals price in global market and its positive impact on Iranian stock market. Meantime, the growth of metals and minerals price in the world market has led to stock price increase which has placed metal group at the top of the shareholders interest.

Exchange rate

The official rate of the Central Bank and the free market rose by 6.1% and 5.6%, while the exchange rate gap was 5,051 IRR, which has grown by 3%, in the year ended March 2017, year-on-year.

Price index

The consumer and the producer price index rose to to 109.8 and 252.2 equal to 9.8% and 11.3% , respectively. Also, export price index reached 275.9 showing an increase of 26.4%, in November 2017, compared to the same month last year.

Doing business index

Iran gained the world’s 56.22 score, ranking the world 120th in 2017 and with a slight decline by 4 ranks down to 56.48 achieved 124th place in 2018. In terms of the top 10 business facility indices Iran has been able to improve its global ranking in 4 sub-indices including start-up, licensing, credit and foreign trade compared to last year. However, in other 6 sub-indices, electricity accessibility, property registration, supporting minority investors, tax payments, contracts, bankruptcy and debt payment has experienced a relative decline in its global rank.

Global competitiveness index

Iran reached the 69th rank by ascending 7 steps, among 137 countries in the Global Competitiveness Index (CGI) in 2017, compared to the previous year position, 76th of the world among 138 countries. The comparison shows that Iranian CGI have improved other than health and education in 2017, since this has been due to improved performance of the macroeconomic arena, followed by “innovation” as the next highest improvement.

Household budget in urban areas

The annual expenditure of a household was 393,005,874 IRR, in the year ended March 2017, with an increase of 11.4% year-on-year. The composition of household budget indicates that the housing, food and beverage expenditure had the highest share in the year ended March 2017.

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