Recent data released by Iran’s Central Bank reveals that the country’s GDP growth in the first half of 2024 has halved compared to the same period in 2023. According to the statistics, Iran’s economic growth stood at 5.3% in the first half of last year but dropped significantly to 2.9% during the first six months of this year.
Seasonal Trends and Sectoral Breakdown
A closer analysis of the data indicates that economic growth during the summer was weaker than in the spring. Including oil revenues, the growth rate was 2.7%, but excluding oil, it fell to just 2.3%. This highlights a critical reliance on the oil sector to drive overall economic performance.
Over the past two years, Iran’s economic growth has been heavily dependent on the oil sector, rather than on industries such as services, manufacturing, or agriculture—sectors more directly tied to the livelihoods of ordinary citizens. In 2023, the country’s total economic growth was reported at 5%, largely fueled by an 18.8% increase in the value added by the oil sector. This trend has persisted into 2024, with a 9.3% growth in the oil sector contributing significantly to the overall economic figures.
Oil Exports: A Double-Edged Sword
Global trade and energy intelligence firms Kpler and Vortexa report that Iran’s oil exports have surged by 34% in 2024 compared to the previous year and by 100% compared to two years ago. Currently, Iran exports 40% of its produced oil and gas condensates and 7% of its gas production.
However, this reliance on oil exports poses risks. While robust oil export growth has propped up GDP figures in recent years, signs of trouble are emerging. Kpler and Vortexa’s data show a sharp decline in Iran’s oil exports this fall—a drop of 500,000 barrels per day (almost one-third) compared to the summer. This downturn raises concerns about further deceleration in economic growth for the latter half of the year.
Questionable Sectoral Growth Claims
The Central Bank’s estimates for sectoral growth have drawn skepticism. For instance, despite widespread summer electricity outages that adversely affected industry and agriculture, the Central Bank reports growth rates of 1.7% and 2.8% in these sectors, respectively. These figures contrast with independent reports indicating a decline in industrial and agricultural output.
Missed Development Targets and Future Outlook
The slowdown in economic growth comes as the government aims for an ambitious annual growth rate of 8% under its 7th Development Plan, which spans five years starting in 2024. However, projections from the International Monetary Fund (IMF) paint a bleaker picture. The IMF predicts that Iran’s economic growth rate will continue to decline, reaching as low as 2% within the next five years.
Conclusion
Iran’s economic performance in 2024 underscores its vulnerability to external factors and structural inefficiencies. While oil exports have been a critical driver of growth, the lack of diversification in the economy leaves it exposed to fluctuations in global oil markets. Moreover, questionable data from domestic authorities adds to the uncertainty surrounding the country’s economic trajectory. Without significant changes and broader investment in non-oil sectors, Iran’s ambitious growth targets may remain out of reach.
Source » irannewsupdate