Thursday
Feb042010
Iran Analysis: The Missing Numbers in the Economy
Thursday, February 4, 2010 at 17:29 
Seyedmohammadsadegh Alhosseini writes for Persian2English on the latest quarterly report on Iran's economy, covering July-September 2009:This quarterly report on the economic condition in the country contains some important points. 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 (21 March 2008-20 March 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.
Reader Comments (19)
Any estimate that the Iranian economy grew at all last year is likely highly over-optimistic. Considering that Russia (which is also dependent on oil exports) economy declined by over 7% last year, Iran's economy probably did worse, not better. Iran (particularly its government) is even more dependent on oil revenues than Russia, its finances are managed much worse than Russia (Russia had amassed a large reserve fund over the past 10 years of oil boom, while Iran's was squandered), and the political crisis likely required large expenditures to contain. Also inflation and capital outflows were likely much worse in Iran than Russia for a variety of reasons. Any estimate that Iran's economy didn't decline drastically is likely way overoptimistic.
The CBI did not publish growth rates for 1388, or even for any quarters of 1388. This is likely because there is political pressure not to do so - never before has this occurred in its history during the IRI. Adam is right that the economy probably did not grow to any serious extent. Let's be clear - 3.2% annual growth is not good for a developing country where many young people are entering the labor market each year. It is adequate for a rich country like the US. But for Iran's case it needs a much higher growth rate to lower unemployment - the 4th development plan (unrealistically) aimed for 8%.
But the amassing of foreign reserves is not necessarily related to growth - it is used to prevent balance of payments crises like the one Russia had in 1999. Iran has never had one of those, and it is not likely to happen because, according to the press this week, it still has reserves at around 60 Billion USD. That's hefty enough to prevent a foreign exchange crisis for the time being, no matter how bad the economy and the balance of payments gets.
Secondly, Iran is less integrated into capital flows than Russia and Turkey, whose severe declines over 2008/9 were not just related to declines in exports, but declines in foreign short and long-term investment. Iran has very little foreign investment to speak of in the first place (a perverse benefit of isolation), so the effect of a drop off will be less harsh.
Adam's right to say that the economy here is bad. But Russia's is probably worse in comparison to two years ago than Iran's.
I think you may find that those reserves are long gone
Well, in fact, one can look at Iran's balance of payments figures, which are more available than their growth figures, and estimate the possible range of reserves remaining. I, like many others, have heard lots of hearsay here that the government "has no money." But for now, that seems to be wishful thinking. I'm no defender of the regime's economic competence, but one needs to base one's economic analysis on solid ground, not opposition hopes. This time 2011, hey, you may be right!
I think a better indicator than GDP would be Gross National Happiness (GNH). I gather Bhutan is at the top of this list. It would be useful to know where Iran stands on this at present and whether it is above or below the US!
i was curious on why u use #tcot and #p2 hashtags..u dont look like a "teabagger"
Maliheh,
We always try to get news about Iran out to people who may not have noticed the important developments but who may become interested, so on Twitter we send "tweets" about our articles to #p2 (the general US "liberal" community) and #tcot (US "conservative" community).
S.
ok i understand by reading your post u dont seem to be a "conservative" rather independent like me[but i have liberal views]your exactly right iran deserves all media attention even if me or you do not agree with different parties~keep up good work my friend=)
@scott
Your efforts of informing people about events in Iran is not much appreciated, and I know how important public opinion is when it comes to policy making especially that of the US.
Sir, you have my gratitude.
Scott
Thanks to your work , we have all the informations about our country; I am sure your efforts of informing people is even appreciated inside the country; look at Hossein, whereismyvote and the other ones living in Iran; on behalf of all of us I say you THANK YOU !
Danial, Ange, and everyone,
Thanks for kind words. Couldn't do it without all of you....
S.
Yeah thanks Scott for promoting more rumors ('important developments') as fact without bothering to meet the basic obligation of a journalist to actually check it out before passing it along. Did you even bother to run this claim that Iran is "hiding its GDP" by any, you known, economists? Or is the fact that some website somewhere wrote it good enough? Here's a suggestion -- go see Djavad Salehi-Isfahani, who has done a wonderful job of explaining Iran's economics. THEN promote this story. That is called journalism. You may want to look it up.
See, there's a difference between being a blogger and a journalist.
Hass,
Thanks for the advice. When posting Persian2English's story, we did check with a couple of economists. Economists in Tehran. Economists who had seen the figures.
And you know what else we did? We also noted the criticisms from Parliament. Criticisms from "conservative" lawmakers. Of Ahmadinejad's budget. And worries of rising unemployment and inflation. And declining investment and, hmm, GDP.
We even checked out a news story from last autumn about Iran's economy: "The IMF projects 1.5 percent growth this year and 2.2% in 2010....Salehi-Isfahani said short-term politics remained focused on issues of redistribution rather than investment to foster growth." (http://www.shababinclusion.org/userfiles/file/Salehi-Isfahani%20EMnews%204%20Oct%2009.pdf)
I think you'll find that's journalism. As opposed to flaming EA and other news outlets by parroting lines from a particular website (tell Cyrus we said hello).
Bye and good luck.
S.
Thank you Scott Lucas. This Hass character is a reactionary of worst kind. He goes by several different ID's in Iranian.com.
Keep up the good work.
There area a bunch of paid economists, Salehi among them, who have fallen into the abyss of Iranian governmental lies and more lies. They are not brave enough to get out and admit that there are lies fed to the world and to the Iranian people on all things including economic measures. Iranians are getting wiser and no longer believe this sort of nonsense fed by the government agencies and ministeries which are then the source for "objective" studies by economists. Common, stop the lies. The facts are that the economy is in shambles, oil revenue is there to mask the 30 year long mistakes where the national wealth has been pilfered and stolen. Every year another million go below the poverty line, according to a few brave figures in Iran, but who may go to jail or stop. The infra structure of industry, agriculture, etc. are all in ruins, nothing long term with well defined plans have been implemented. In brief, the country is on borrowed time and the money is infused daily from oil revenues, that is like a shop in the Tehran Bazar. "Who is buying today?" Iran must be built from scratch again. That will be the only solution. This system is too corrupt, too inept and falsifying everything all the time. Does anyone who can analyze things believe this IRI? I wonder.
This is the writer of this article, for those who wants fighting!
to hass: u can find most recent iran economy indicators here
http://www.cbi.ir/Newestdoc.aspx?id=0&dn=EconomicTrends_fa&dl=2
this is the reference of this article.
you can see that at the end of 1388 the fed doesn't announce the 1377`s GDP!!
what is that mean? clearly hiding the GDP!
Another thing here: in translation, the Iran's growth wrongly changed to 3.2, while the real rate is 2.3 not 3.2. while the average of growth in the world was around 3.
is it the optimal or quasi optimal growth???!, also in translation the "subtract" of two years GDP wrongly indicated as "sum"!!
and the end: this article was written for Donya-e-eghtesad Newspaper.(den.ir)
[...] ایران به صدا درآمده است” در وبگاه های مختلف: +، + ، [...]
@ #18
This entry refers to headlines from the reknowned newspaper "Donya-e Eghtesad" (World of Economics) and to an article, written by Mr Zamanzadeh and Alhosseini, referring to the forthcoming study (book) "Analysis of foundations and structures of Iranian Economy" http://www.donya-e-eqtesad.com/Default_view.asp?@=194308
Iranian economic experts started to criticise AN's derailed economic policies already 2 or 3 years ago, any attempt to present them as post-electional propaganda is derisory.