Oil gets lion’s share in Iran’s economic growth in H1
Agricultural sector exceeds expectations
Preliminary findings on Iran’s economic growth in the first half of the current Iranian year (started March 20) indicate that oil remains the primary driver of the country’s economic growth. However, the agricultural sector has also demonstrated significant growth, outperforming industry and services in its contribution to the economy.
The quarterly reports of the Central Bank of Iran (CBI) on economic growth are a key indicator of whether the economy is thriving or faltering. According to IRNA, a notable change in the second quarter’s reporting is the shift in the base year from 2016 (1395 in the Iranian calendar) to 2021 (1400), aiming to provide a more accurate reflection of economic realities by adjusting for inflation.
Key economic indicators
Preliminary calculations from the CBI show that Iran’s GDP at constant prices (the base year being 1400) reached 2,130.9 trillion rials in the second quarter of the current calendar year of 1403, reflecting a 2.7% growth compared to the same period in 1402. Excluding the oil sector, economic growth for the same period was 2.3%.
Investment growth, measured by ‘gross fixed capital formation’ at constant prices of 1400, increased by 4.6% compared to the same quarter in 1402. Investment in machinery grew by 4.4%, while construction saw a 4.8% increase.
In the second quarter of 1402, gross fixed capital formation had grown by 4.3%, with machinery and construction investments rising by 7.2% and 2.2%, respectively.
For the first half of the current year of 1403, Iran’s GDP, including oil sales, stood at 40,360.2 trillion rials, while GDP excluding oil sales was 37,034.1 trillion rials, reflecting growth rates of 2.9% and 2.4%, respectively. This sustained growth follows positive economic performance across all quarters of 1402.
Economic growth drivers in Q2 of 1403
Analysis by sector shows that GDP growth in the second quarter was driven by positive contributions across all major sectors. Growth rates were:
- Oil and gas: 8.8%
- Agriculture, forestry, and fishing: 2.8%
- Services: 2.5%
- Industry and mining: 1.7%
When analyzed by final expenditure components (with 1400 base year), gross fixed capital formation grew by 4.6%, government final consumption expenditures rose by 4.4%, and private consumption increased by 2.4% compared to the same quarter in 1402.
Economic performance in H1 of 1403
In the first half of the current Iranian year, sectoral growth rates were as follows:
- Oil and gas: 9.3%
- Agriculture, forestry, and fishing: 2.8%
- Industry and mining: 2.4%
- Services: 2.2%
These sectors contributed 0.7%, 0.4%, 0.8%, and 1.0 percentage points, respectively, to overall GDP growth during this period.
Industrial growth, particularly in large manufacturing facilities with over 100 employees, was 1.3%, with these facilities accounting for 70% of the industrial sector’s value added. Among the 24 key industrial subcategories, 15 reported positive growth, including chemical products, basic metals, food production, power generation, and electrical machinery.
Expenditure analysis
During the first six months of 1403, gross fixed capital formation grew by 4.1%, as private sector consumption rose by 1.9%, and government overall consumption increased by 0.6%, compared to the corresponding period of last year.
Notably, machinery investment in Q1 and Q2 of the current Iranian year rose by 0.9% and 4.4%, respectively, reflecting improved economic activity compared to the same periods in 1402.