CBI: Economy posts 3.7% growth as non-oil trade hits $116b
Mohammadreza Farzin, the governor of the Central Bank of Iran (CBI), outlined the latest economic developments, stating that the country’s economy experienced a 3.7% growth in the first nine months of the current Iranian year of 1403 (March 20-December 20, 2024).
Fixed capital formation grew by 3.4%, while non-oil trade volume surpassed $116 billion, marking an 11.2% increase during the nine-month period.
Farzin also noted that inflation has been controlled and reduced from 55.7% to 35.4%, attributing the tumble to governmental measures curbing liquidity and monetary base growth.
He added that small- and medium-sized enterprises (SMEs) will benefit from more innovative financing methods in the upcoming year’s credit policies.
Farzin highlighted that the 3.7% economic growth rate is a stable and proportional figure, comparing favorably with global and regional averages.
He pointed out that while China and India remain global economic growth leaders, European countries have experienced low growth rates for years.
Iran’s growth rate outperforms regional peers such as Turkey (2.8%), Saudi Arabia (1.4%), Pakistan (2.5%), Iraq (1.4%), and the Middle East and Central Asia average of 2.4%.
Despite political and security challenges in 1403, including the unexpected death of the president and subsequent uncertainties, Iran achieved a relatively strong growth rate. Farzin acknowledged that while the 3.7% growth is acceptable, it falls short of the targeted 8%, and efforts are underway to improve growth figures in the final quarter of the year.
Farzin explained that economic growth calculations are based on both base prices and market prices. Using market prices, Iran’s economy grew by 3.9% in spring, 3.5% in summer, and 3.9% in autumn, averaging 3.7% over the nine months.
Using base prices, growth was 3.1% in spring, 2.7% in summer, 3.6% in autumn, and 3.1% overall. He noted that while growth slowed slightly in summer, it rebounded in autumn, driven by non-oil sectors such as agriculture, services, and industry.
The services sector, accounting for 50% of GDP, played a significant role in economic growth, followed by industry and mining (30%), agriculture (10%), and oil (10%). Farzin emphasized that the services sector’s large share makes it a key driver of overall economic growth.
Fixed capital formation grew by 3.4% in the first nine months, with machinery investment contributing significantly due to currency policies aimed at meeting capital needs.
Non-oil trade volume grew by 11.2%, reaching $116 billion, up from $105 billion in corresponding period of 1402. Exports rose by 18.8% to $53.3 billion, while imports increased by 5.6% to $63 billion, resulting in a $10 billion trade deficit excluding oil. Including oil exports, the trade balance would show a $15 billion surplus.
Farzin also discussed efforts to increase gold reserves through exports, noting that some imports are related to gold, which bolsters national reserves.
The CBI governor highlighted the importance of supporting production and preventing liquidity blockages, which have contributed to increased liquidity growth, reaching 27.8% in Bahman (Jan. 20-Feb. 18).
The monetary base growth rate stood at 22% in Bahman, below the multi-decade average of 25%. Farzin stressed that maintaining this rate aligns with long-term trends and supports inflation control. Annual inflation decreased from 55.7% at the beginning of 1402 to 35.4% in Bahman 1403, with further reductions expected through new policies.
Farzin also addressed producer inflation, which peaked at 82.6% before dropping to 40.4% at the start of 1402 and further to 26.7% in Bahman 1403. He noted that producer inflation is a leading indicator for consumer inflation and expressed hope for further declines in the coming year.
In conclusion, Farzin emphasized the resilience of Iran’s economy, with growth across all sectors, particularly non-oil industries.
He reaffirmed the CBI’s commitment to stabilizing monetary policies, supporting SMEs through innovative credit methods, and controlling inflation as a key priority.