Iran’s economy grew by 3.6% in the 2020/2021 Persian calendar year (ended March 20), Akbar Komijani, lately appointed caretaker governor at the Central Bank of Iran (CBI), was cited as saying by Press TV. If verified, it would mean Iran has emerged from the long and bitter three-year recession that set in around May 2018 when former US president Donald Trump hit Tehran with renewed and intensified heavy sanctions.
Komijani was also reported as stating that Iranian GDP expanded in the Persian year fourth quarter by 7.7%. That was said to have followed two successive quarters of growth beginning late July 2020. Officials have credited higher exports and a general realignment of the economy, necessitated by the impact of heavy US sanctions, with securing the new growth.
Trump’s sanctions drive against Iran kicked in halfway through 2018, a year that brought a GDP contraction of 6%, according to the World Bank. Things worsened in 2019 as the sanctions screw was tightened, with economic output falling 6.8%.
The Iranian currency has recovered since the Trump presidency but remains volatile. The Iranian rial (IRR) on May 5 reached its strongest rate against the dollar on the open market in three months, causing the central bank to deny it was boosting the currency and to say it was gaining on strengthening sentiment for a positive outcome from the ongoing Vienna talks aimed at reviving the 2015 nuclear deal. By the end of trading, the IRR reached 209,000 versus the USD.
Iran’s annual inflation was posted at 45.2% in the fifth Persian calendar month, highest in 27 years, the Statistical Centre of Iran (SCI) reported on August 24. SCI reported that the fastest inflation hikes occurred with food and beverages and tobacco, especially given price rises of vegetables, dairy products, eggs and bread.
Iran, which has lately faced social unrest after inhabitants in its southwest were left struggling to access water amid the worst drought it has suffered in 50 years, conceded that its wheat harvest this year would be so inadequate that for the first time in five years the country would have to import wheat.
Drought-related water deficits have also led to rolling power cuts in localities supplied by hydroelectric plants. They supply around 15% of Iran's power supply, according to energy ministry data.
Iran is struggling with its fifth and most deadly wave of coronavirus wave. The massive upswing in infections is partly due to the poor rollout of vaccines in the country and large increase in black market sales forcing many to have to go without any protection from the virus.
Iran has approved the use of US firm Johnson & Johnson's COVID-19 vaccine, a senior official said on September 16. The same day saw the official coronavirus death toll in Iran’s 84mn population exceed 116,000, with 450 more fatalities in the latest 24-hour cycle. Another 18,021 new infections were recorded, with 2,859 resulting in the patient being hospitalised.
Meanwhile, Iran cements ties with East as it becomes full member of the Shanghai Cooperation Organisation (SCO) on September 17. Referring to sanctions in his summit speech as a form of “economic terrorism”, Ebrahim Raisi said Iran wanted closer ties with its regional neighbours and rejected Washington’s “unilateralism”.
On the political front, Iran on September 28 rejected a US call to grant UN inspectors access to a nuclear site. Washington, said Tehran, was not qualified to demand inspections given that it had not condemned a sabotage attack on the facility, Iranian state media reported. The US said Iran must grant access as agreed or face diplomatic retaliation at a meeting of the UN nuclear watchdog International Atomic Energy Authority (IAEA)’s 35-nation board of governors.
Iranian President Ebrahim Raisi tore into the US for its treatment of Iran in his first UN speech late on September 21. He castigated the Americans for their sanctions on Tehran, overseas military interventions and the January 6 insurrection at the Capitol building in Washington. Iran has previously protested that US sanctions hindered its ability to source vaccines.
Iran on September 21 said it planned to return to the stalled Vienna talks on reviving the 2015 nuclear deal, or JCPOA, within a few weeks. Tehran wants some protection from any future US walkout from the Joint Comprehensive Plan of Action (JCPOA), should it be relaunched. It is seeking guarantees that the US would, if in breach of UN security council resolutions, pay compensation.
US President Joe Biden also delivered his first UN speech as president earlier on September 22. He emphasised that his administration is entirely willing to rejoin and fully comply with the JCPOA if Tehran agreed to stick to its terms in return for verifiable compliance with measures aimed at keeping its nuclear development programme entirely civilian in nature.
The sixth round of indirect talks in Vienna came to a halt prior to the June presidential election in Iran, which saw hardline cleric Ebrahim Raisi voted in to succeed moderate politician Hassan Rouhani as president. Raisi has said his administration is committed to proceeding with the attempt at re-establishing the JCPOA.
Looking ahead, the Institute of International Finance (IFF) forecast that should the signatories to the original JCPOA manage to agree a comprehensive new nuclear agreement that moves beyond the 2015 terms, Iran would see GDP expand by 4.3% this year and by 5.9% and 5.8% in 2022 and 2023, respectively.
If Tehran and the major powers fail to strike any agreement to revive the JCPOA, unemployment in Iran would likely remain in double digits and there would be subdued economic growth of 1.8% this year, the IIF estimated.
President Recep Tayyip Erdogan did it again. On September 23, Turkey shocked with a 100bp rate cut. More cuts are awaited despite booming (even official) inflation and global inflationary period.
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