Decoding Iran's economic indicators

In the past few weeks, there has been a major debate in Iran about the validity of economic data presented by the Central Bank of Iran (CBI) and government officials. It all started with a detailed report by the CBI stating that the Iranian economy grew by 4.6% in the 12-month period ending in spring 2014.

Within days, Gholamreza Mesbahi Moghaddam, head of the Budget and Planning Committee in the Iranian parliament, commented that the published figures were "wrong and misleading" and “like a fable.” The CBI reacted immediately and outlined its evidence for its reported economic growth.

Before discussing whether 4.6% growth was realistic, it should be appreciated that the government as well as the CBI have resumed issuing regular economic reports and indicators. The government of former President Mahmoud Ahmadinejad had discontinued the practice for years, and that indicators are calculated and reports published and debated is a welcome development in Iran.

Now to the question of the country’s actual economic growth in the period from July 2013 to June 2014: Though the author has no independent economic data to confirm or dispute the official data, one can point to various phenomena. To understand the published figures, one needs to remember the situation in spring 2013. Prior to the June 2013 elections, the business community and investors were very hesitant and concerned about their outcome. The free market value of the rial had dropped to about 40,000 to the dollar as a hedging mechanism in anticipation of worsening economic conditions. Prices for domestic gold coins soared as many investors were trying to hedge their capital by investing in gold. However, the election of Hassan Rouhani generated economic momentum and the rial appreciated to 29,000 to the dollar, and business started to pick up.