Iran Press/ Iran news: The summary highlighted that Iran’s gross domestic product (GDP) grew by 4.7% in 2021-22, marking seven consecutive quarters of year-on-year growth.
The recovery in global oil demand along with the pickup in Iran’s oil exports drove a strong expansion in oil production of 10.1% YOY during this period. Less strict containment measures and an accelerated vaccination rollout led to a 6.5% expansion in services — the main driver of non-oil growth (3.9%) in 2021-22. However, unprecedented droughts and energy shortages led the labor-intensive agriculture and construction sectors to contract. As such, despite experiencing two years of economic growth, total employment has yet to recover to its pre-pandemic level, especially among women, it added.
The full text of the summary follows:
Despite a more accommodative fiscal policy in 2021-22, higher oil and tax revenues have improved the fiscal deficit-to-GDP ratio. In 2021-22, the government’s general budget resources (expenditures plus acquisition of financial assets) grew by 78% within the range of the two scenarios envisioned in the budget. The growth in expenditures was driven by an increase in public sector wages, adjustments to pension payments to compensate for the loss of purchasing power due to inflation, and rising import costs. On the revenue side, planned oil revenues are reported to have been fully realized in 2021-22 due to higher oil prices and oil export volumes in the second half of the year.
Despite some challenges, efforts toward domestic revenue mobilization and expanding the tax base helped improve non-oil revenues. Tax revenues met their planned budget target, in part aided by the impact of inflation on the nominal growth of the tax base. As a result, the fiscal deficit is estimated to have moderated to 5.3% of GDP in 2021-22 from 6.3% of GDP in 2020-21.
Consumer price inflation accelerated due to a combination of supply-push and demand-pull factors, adding to pressures on the welfare of lower-income households. In 2021-22, Iran marked its third consecutive year of annual inflation of above 35%, driven by rapid growth in monetary aggregates, inflationary expectations, and rising global commodity prices. The headline and core inflation climbed to 40.2% and 36.7% in 2021-22, respectively, with headline inflation registering the highest rate in a decade. The surge in food prices following the war in Ukraine added to inflationary pressures and increased the fiscal burden of subsidized food imports. In response to the growing food import bill, the authorities ended the import subsidies for some essential goods, increased the guaranteed purchase price for domestically produced wheat, and raised the administered price of certain food items to reduce smuggling.
To mitigate the impact on consumers, these measures were combined with the introduction of additional cash transfers and announced plans for the deployment of electronic coupons for the purchase of essential food items. These measures led to monthly inflation increasing to 12.2% in June 2022 month-on-month (MOM) — a record high for monthly inflation. Food prices increased by 25% MOM, which was felt most by lower income deciles and in rural areas.
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