Monday, May 31, 2004
Iran's buoyant economic growth eases to 6.7%
Reuters Tehran, May 31
Iran's fast-growing economy cooled slightly in the last fiscal year, with a slowdown in the agricultural sector weighing on a robust showing from the dominant oil industry, a Central Bank official said on Monday.
Real GDP growth slipped to 6.7 per cent in the year ended March, weakening from 7.4 per cent the previous year, Mohammad Hadi Mahdavian, Director General of economic affairs at the Central Bank told Reuters in an interview.
"That is solely attributable to (lower growth in) the agricultural sector," he said, explaining farm sector growth had fallen to 5.3 per cent after a bumper previous year that topped 11 per cent because of near-perfect weather.
He said around 20 per cent of the Islamic Republic's GDP was dependent on agriculture. Iran is the world's top pistachio producer and also has significant output of saffron, dates, olives, shrimps, caviar, wheat, dairy and citrus products.
The oil and gas sector of OPEC's second biggest producer grew by 8.4 per cent, rising from 5.1 per cent growth the year before, boosted by strong global energy prices.
Overall non-oil growth sank to 6.5 per cent from 7.8 per cent, but growth declines in sectors other than farming were slight.
Mahdavian said petrochemicals, iron and steel, cement and car manufacturing had been among top performers.
Imports racing into the country of 66 million people sharply narrowed the current account surplus which dipped to $1 billion in the 11 months ended February. It stood at $3.7 billion in the year ended March 2003.
The economist said Iran had no current plans to intervene to arrest this sharp decline but said it was a threat policy-makers might address in the country's next five-year economic development plan that starts in March 2005.
"In the past three years, on average, we have had a six per cent rate of growth in the Iranian economy while, on average, the growth in imports has been beyond 16 per cent," he said.
"Year after year the local producers are losing ground to the importers and that is not a healthy trend."
UNEMPLOYMENT SLASHED
He said Iran had tackled unemployment, which fell to 11.6 per cent of the workforce by September 2003. Unemployment stood at close to 16 per cent in March 2000.
"The high unemployment figure eventually became a social issue," he said. Iran was keeping a rein on inflation which eased to an average annual rate of 15.6 per cent in the year ended March, down from 15.8 per cent the year before.
Iran has already raised heavily-subsidised fuel prices 23 per cent this year and is discussing plans to increase petrol prices to global levels from $0.10 per litre currently.
Parliamentarians have said the fuel hikes threaten a severe inflation spike but Mahdavian said the increases would be implemented gradually. "The growth in different sectors would allay all those negative impacts on the inflation front," he said.
He also added that Iran needed to tighten money supply growth by assessing whether government largesse to high-spending social agencies actually helped the economy.
"They dispense money and there is no clear and independent assessment of how they contribute to the growth of the Iranian economy," he said.
Mahdavian said Iran had no plans to sell sovereign debt on the Eurobond market this year, but added the subject was always open to discussion. Parliament recently rejected a plan by the Management and Planning Organisation, a body administered by one of the country's vice-presidents, to issue $1 to $2 billion of Eurobonds this financial year as part of a $9 billion financing plan.
© HT Media Ltd. 2004.