Iran’s President Claims ‘Our Economy Shrunk a Little’

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Iran's shrinking economy
Iran’s shrinking economy

By Pooya Stone

Iran’s President Hassan Rouhani, on 2 September, put a part of his government’s economic record in public and while addressing the issue of the coronavirus and other current issues of the country, he claimed that in the first quarter of this year, the economy has shrunk only 1.7 percent. He also made a highly dubious comparison, saying that ‘many countries have experienced negative economic growth of 9% or 10% and 12% to 13% during these four or five months during the corona period.’

When the facts push back Rouhani

Addressing the whitewashing by the President in the field of macroeconomics of the country does not require much careful study and analysis of charts and evaluation of research circles. It is just enough to listen to the workers of the country who are now for more than a month on the streets and are crying:

“Our purchasing power has decreased by 70 percent compared to previous years. The salary of about 65% of retired workers is less than 3 million Tomans, while the poverty line has been announced by the officials as 6 million Tomans. We conclude that 70 percent of retirees are below the poverty line.” (ILNA, 3 September)

“According to the annual statistics of the International Monetary Fund, the Islamic Republic of Iran in 2019 experienced the highest decline in GDP (minus 8.2%) among the countries of the world. Only 15 countries in the world had a decrease in GDP in 2019, and Iran is one of the few countries in the world that has followed this downward trend for three consecutive years.” (Mostaghel, 2 September)

While the state media are crying about a “liquidity explosion”, the president is claiming that, “Thank God, the growth of our monetary base has been less than 3% in these five months, which shows that the path of our economy is on the right path that we are following.”

It would seem strange, then, that just a few days before him, the Chairman of the Central Bank Naser Hemmati said about the same issue: “I am happy to tell people that liquidity is controlled and the monetary base in the first five months of this year has grown by only 4% compared to the end of last year, and liquidity has increased by 12% during this period”. But his President downplayed the statistics and said just, ‘three percent’. It seems that for this government, one percent up or down in the statistics of the monetary base does not make any difference.

According to the official announcement in the last days of 2019, the liquidity figure was more than 265.7 trillion Tomans. Hemmati claims that this figure has grown by 12 percent in the first five months of this year and has reached 297.6 trillion Tomans. Hemmati was pleased that this liquidity growth rate was slower than in previous years, but official statistics (central bank) show that the liquidity growth rate in the first five months of all the years of the last decade was lower than 12 percent, and therefore this year’s liquidity growth rate is considered as a record.

What do official and international statistics say?

In this regard, the Statistics Center of Iran says in a report that the country’s economy in the spring of this year has shrunk by 3.5 percent compared to last year. The report shows that Rouhani has looked at a part of the report where GDP has fallen by 1.7 percent, excluding the oil sector.

Interestingly, the same report also mentions the negative growth rate of economic groups. The services group, which accounts for nearly half of GDP, had a negative growth of 3.5 percent. In addition, the industrial and mining sector grew negatively by more than 4 percent, and the agricultural sector, with all the fake advertising, achieved a negative growth of 0.1 percent.

The most obvious is the oil and gas sector, which recorded a negative growth of 14.3 percent. Of course, no one knows the true amount of oil and gas production or the government’s export figures, and these numbers and figures have an official aspect and are far from reality.

International organizations estimate that in recent months, Iran’s oil exports have been in the range of 300,000 barrels. With the help of techniques to circumvent sanctions and use of other countries’ flags and other tricks.

It is because of this dire economic situation that the International Monetary Fund says Iran’s economy is 6 percent smaller than last year. This organization had assessed Iran’s GDP in 2018 and 2019 as negative 7.6 and 5.4 percent. The World Bank also forecasts a slowdown in Iran’s economic growth in 2020 to negative 5.3 percent.

The negative growth of Iran’s economy during the last three years reached 9.8 percent and the per capita decrease in Iran’s GDP during this period amounted to about 215,000 tomans.

More interestingly, in early September, when Rouhani announced that the economic damage from the coronavirus was 3 percent, the Minister of Economy of his government had indicated 15 percent damage to the economy a few months earlier, which again showed that Rouhani was either unaware of these official statistics or not at all does not care about the statistics.

Meanwhile, the state-run daily Jahan Sanat wrote: “In recent weeks, with the continuation of high inflation, which began in 2018, the issue of Venezuelazation of Iran’s economy has once again become a hot topic in the media and even scientific circles of the country. Although this risk is probable, it is not very likely and a much more important and likely danger threatens Iran’s economy.

“And that is the transformation of Iran’s economy into an example of a failed economy. If Venezuela has become an unsuccessful economic model due to the formation of hyperinflation, Iran’s economy can also become another example of a failed economy. (Jahan Sanat, 3 September)

 

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