Page 4 - IRANRptOct20
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1.0 Executive summary
Iran’s gross domestic product (GDP) officially contracted 3.5% y/y during the first quarter of the 2020/2021 Persian calendar year (March 20 to June 20), according to the Statistical Centre of Iran (SCI). A double whammy of inflationary pressure exerted on the economy by the impact of heavy US sanctions and a severe coronavirus (COVID-19) outbreak wreaked havoc on the already struggling economy.
Iran officially has the Middle East’s worst COVID-19 outbreak. It is enduring a third wave of the pandemic and has seen more than 24,000 deaths attributed to the virus according to the official logs, although previous leaks to the media indicate the real tallies are several-fold higher. Iranian President Hassan Rouhani had announced that the state of emergency imposed on the country in the face of the coronavirus pandemic is to be kept in place at least until the end of January 2021.
The sanctions regime imposed on Iran by the US amounts to unprecedented “savagery” that has cost the Iranian people $150mn, President Rouhani said in a televised speech on September 26. Telling Iranians to direct their anger over the impact of sanctions at Washington, he said the sanctions had even prevented the purchase of medicines and food.
US Secretary of State Miki Pompeo said on September 21 that Washington was determined to keep up its "maximum pressure" effort against the Islamic Republic “until Iran is willing to conclude a comprehensive negotiation that addresses the regime’s malign behaviour".
The severe depreciation of the Iranian rial (IRR) in the face of US sanctions is driving high inflation rates in Iran. Inflation in Iran stood at 27.8% y/y in the fourth Persian calendar month (ended June 20). Average inflation in the previous Persian month was measured at 29.8%.
Iran’s rial has hit the 300,000-to-a-dollar threshold for the first time on the unregulated free market in Tehran, weakening to a new all-time low on October 1 as tensions with the US tightened and as what Iranian officials are describing as a “third wave” of the coronavirus (COVID-19) pandemic continued to take a toll on the economy. The currency that was trading at around 32,000 to the USD in 2015 when Iran signed the nuclear deal with six world powers.
The Tehran Stock Exchange’s main index, the Tedpix, closed September 8 down 2.31% at 1,570,001. Shares rose to a record high of 2,065,114 on August 9. The index for the first time climbed above two million points on August 2. Amid Iran’s economic dire straits, investors continue to pick out one of the few profit-making spheres of investment, but anxieties that a massive bubble is building up have not gone away.
The World Bank’s Global Economic Prospects report released on June 8 said that Iran will likely have to reckon with a GDP contraction of 5.3% in 2020, partly reflecting the effects of its large-scale coronavirus (COVID-19) outbreak on domestic consumption and the services sectors.
4 IRAN Country Report October 2020 www.intellinews.com
