Iran eyes major economic growth next year

Rouhani presents conservative 2018 budget as US tensions cloud economy

TEHRAN: Iran’s President Hassan Rouhani presents to the parliament his budget for 2018-2019 yesterday in Tehran. —AFP

TEHRAN: Iran’s President Hassan Rouhani promised high economic growth as he laid out next year’s budget yesterday, despite uncertainty over whether the United States will pull out of the nuclear deal. Rouhani proposed to parliament yesterday a conservative state budget of about $104 billion for next year, with the outlook for the economyand state revenues clouded by tensions with the United States.

Presenting the budget to parliament, Rouhani said overall economic growth would hit 6.5 percent in the fiscal year starting in March 2018, and seven percent with the oil sector excluded. Significant economic growth was a cornerstone of Rouhani’s campaign when he was re-elected in May. The government has also forecast 6.5 percent growth for this year but other estimates have been less optimistic. Parliament’s research centre has said Gross Domestic Product will grow by only 3.9 percent this year, while the International Monetary Fund forecasts 3.5 percent in 2017, 3.8 percent in 2018 and four percent in 2019. Rouhani’s first term from 2013 to 2017 was marked by the conclusion of the nuclear agreement with world powers in July 2015, which the president vowed would boost the economy by ending Iran’s international isolation. But major economic improvements have yet to materialize, with foreign investments limited due to fears of US President Donald Trump abandoning the nuclear deal and the return of the economic and financial sanctions that were lifted under the accord.

Unemployment remains high and the IMF estimates it will reach 12.7 percent for 2017. It also says inflation may hit double digits this year as the rial slides against the US dollar. Rouhani announced a draft budget for the Iranian year starting next March 21 of 3,681 trillion rials ($103.9 billion at the official exchange rate), excluding the spending of state enterprises.
That is up about 6 percent from the budget plan for the current year, but since inflation is running at nearly 10 percent, the budget extends the conservative fiscal policy which Rouhani introduced after taking office in 2013.

In a speech broadcast live by state television, Rouhani described the budget as one that would work towards full employment, eliminating poverty and creating social justice. After struggling for years under sanctions, Iran’s economy picked up in 2016 after most restrictions were removed under a deal with world powers on its nuclear program. Gross domestic product grew 12.5 percent last year, according to the International Monetary Fund.

But that leap in growth was almost entirely due to a surge in the oil sector as Iran became able to increase its oil exports; the rest of the economy, which is more important to the welfare of most Iranians, improved much less. The IMF projects growth of just 3.5 percent this year. Unemployment, officially put at around 12.5 percent, is a major cause of public concern and Rouhani said in his speech that 840,000 people would enter the job market next year.

Rouhani is under pressure to boost economic growth and create jobs as his hardline opponents, who were against the nuclear agreement, say he has failed to improve living standards as much as hoped after the lifting of sanctions. US President Donald Trump, who has taken a hawkish approach towards Iran, has said Tehran’s missile program should be curbed and wants to punish Iran over its roles in Yemen and Syria. Trump has also dealt a blow to the nuclear deal by disavowing Iran’s compliance with its terms, and the US Congress may re-impose sanctions or impose new sanctions. This threat has deterred many foreign banks and companies from doing business with Iran.

in past years, the draft budget shows spending and revenues in balance, although the actual result will depend on fluctuations in oil prices. Next year’s budget assumes oil prices of about $55 per barrel, Iranian news agencies reported, up from about $50 assumed for the current year’s budget. The total draft budget, including state enterprises, amounts to 11,949 trillion rials, according to the text of the proposed plan published by Iranian news agencies. The draft budget has to be passed by parliament and approved by a clerical body that vets legislation before it becomes law. – Agencies

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