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Iran economy on road to recovery as domestic production grows

The International Monetary Fund said Iran should emerge from a recession caused by sanctions over its nuclear programme in 2014.

Source : Reuters / 24 Apr 2013

Iran's economy has become more robust as domestic production has grown to offset a 14 percent fall in imports in 2012, sparked by a drop in its currency value, after the central bank was hit by economic sanctions, Iran's finance minister said on Tuesday.

Shamseddin Hosseini, also minister for economic affairs, told reporters in New York that non-oil exports rose 20 percent in the year to March 21, 2013, while inflation rose about 9 percentage points to 30 percent and unemployment hovered at 12.2 percent.

The inflation and unemployment figures given by Hosseini are similar to a recent forecast by the International Monetary Fund, which said Iran should emerge from a recession caused by sanctions over its nuclear program in 2014.

Iran's currency, the rial, lost about a third of its value against the U.S. dollar in 10 days in September and October as sanctions cut Iran's hard currency earnings from oil exports.

Iran denies allegations by Western powers and their allies that it is seeking atomic weapons and has refused to stop enriching uranium. As a result, in addition to four rounds of U.N. sanctions, Iran has faced much tougher U.S. and EU measures targeting its financial and energy sectors.

Hosseini said the "currency shock" caused an "overwhelming increase in prices of imported goods."

"The producers strive to replace and furnish the demand of the imported goods that are rarely or not available at all. So the internal economic absorption replaces the demand for foreign goods,"he said at Iran's U.N. mission.

"This becomes the cause for the economy to move faster, forward, farther. This is my analysis of why the Iranian economy has become more robust,"he said."We have no doubt that during the last year the growth rate in Iran was positive and Tehran stock market index during the last year increased 47 percent."

In October, however, Iran banned the export of around 50 basic goods, its media said, as the country took steps to preserve essential supplies in the face of tightening sanctions.

Food and consumer items are not targeted by sanctions but a growing number of Western shipping companies are pulling back from trade with Iran due to the complexities of deals, whilst also fearing the loss of business elsewhere.

Iran has suffered double-digit inflation rates for most of the past decade. Inflation began rising sharply at the end of 2010, before the latest sanctions were introduced, when the government cut food and fuel subsidies.

"We are of course not able to mitigate every effect of the sanctions or prevent them but we strive in order to transform the energy of the sanctions into a new thought process that gives way to foundational economic reform," Hosseini said.

"Imports have decreased by about 14 percent and this need is now being satisfied by domestic production," he said. "There is no reason for us to keep throwing outside of the Iranian borders the hard earned petrodollars, so we respond to domestic demand."


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