World Bank Predicts Slower Growth For Iran’s Economy
The World Bank has predicted that the Islamic Republic’s GDP growth will fall below two percent in 2024, teetering on the brink of recession as rial is falling and inflation raging.
The World Bank has predicted that the Islamic Republic’s GDP growth will fall below two percent in 2024, teetering on the brink of recession as rial is falling and inflation raging.
In its latest Global Economic Prospects report released on Tuesday, the World Bank also said that global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine.
It said it expected global GDP growth of 1.7% in 2023, one of the slowest paces since 1993 except for the 2009 and 2020 recessions. In its previous Global Economic Prospects report in June 2022, the bank had forecast 2023 global growth at 3.0%. The global economy is projected to grow by 2.7% in 2024.
The outlook for Iran’s GDP is reported as 2.9% in 2022, but it will decrease to 2.2% in 2023, and 1.9% in 2024. The figures pertaining to Iran seem too optimistic given the current 50-percent annual inflation rate and a currency that has dropped by 30 percent just since September.
For example, unlike Iran, most of the countries in the category of Emerging Market and Developing Economies, including Brazil, Mexico, Argentina, Saudi Arabia, India, Pakistan and South Africa, reported negative GDPs in 2020, posing a question about the validity of the figures about Iran, whose currency has fallen more than 10-fold since 2018 and tens of million of middle-class citizens are now considered poor.
The outlook for 2024 for Saudi Arabia, whose consumer prices rose by 2.9 percent on a year-on year basis in November, is projected to be 2.3 percent, while Iran with 40-50-percent inflation in the past 24 months and food inflation recorded at above 70 percent in 12 provinces, is projected to have a 1.9-percent GDP growth. The answer most likely lies in lack of transparency and probably data fabrication by the regime’s authorities.
In recent years, the Islamic Republic has officially stopped providing raw data to the public. Every now and then, officials announce some figures that often do not add up with the available facts or contradict each other. Moreover, the country is so isolated in the international community that the World Bank has to primarily rely on government data for its estimates.
Iran’s government having lost most of its vital oil income due to US sanctions has resorted to printing money, with liquidity and the money supply increasing exponentially, which in turn pushes inflation higher and the national currency’s exchange rate lower. Even pro-government Iranian politicians and lawmakers say that the economic situation is dire and no growth is expected.
According to the World Bank, the bleak outlook will be especially hard on emerging markets and developing economies as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years -- less than half the pace of the past two decades.
World Bank Group President David Malpass said, “The crisis facing development is intensifying as the global growth outlook deteriorates,” adding “Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates.”
"Given fragile economic conditions, any new adverse development -- such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions -- could push the global economy into recession," the bank said in a statement accompanying the report.
Hardliner member of parliament Jalal Rashidi Kouchi said Saturday that banning the exit of senior officials, which is on the agenda of this parliament, is meant for the "protection of the assets and documents of the people and the country."
The plan is titled "Prohibition of the Islamic Republic of Iran's administrators from leaving the country after completing their duties" and will be discussed at the parliament next week, IRGC affiliated Tasnim news agency said.
It is not clear if the timing of this proposal is related to nationwide antigovernment protests and the resulting political instability.
Referring to Iranian fugitive banker Mahmoud Reza Khavari, who was involved in an embezzlement scandal and fled the country to Canada, Rashidi Kouchi said such a plan would guarantee that officials cannot leave Iran with the money they obtained from embezzlement and bribery.
Khavari was the chairman of Bank Melli Iran until September 2011 and chairman of Bank Sepah’s board of directors from December 2003 until March 2005. He was involved in a big embezzlement case worth approximately $950 million. Khavari, who became a Canadian citizen in 2005, is a fugitive wanted by the judicial authorities of the Islamic Republic.
A certain time frame has been proposed for the plan. Officials would not be able to leave Iran in their last year of their service at a certain post and three years following the end of their job. Officials at a certain senior level must also register their properties in an existing system with the Judiciary and must refrain from any sale or transfer of properties during the four-year timespan.
It is still not clear to what levels of seniority the law would apply, but most mid-to-high-level officials often have properties registered to family and friends.
Kouchi also said that according to the plan, the departure of former officials will be subject to the permission of regulatory and security entities, such as the judiciary, the Ministry of Intelligence, the Intelligence Organization of the IRGC and the intelligence division of the police. He added that the priority of implementing this plan is for officials who hold dual citizenships or have close relatives abroad.
The move to adopt such measures can be seen as a sign that some Islamic Republic officials may be trying to relocate from Iran with their families and seek residence in other countries, while the regime wants to erect barriers. The pace of emigration by Iranians, officials and ordinary people alike, has accelerated since the current wave of protests. Many Iranians inside the country and abroad believe that the days of the clerical regime are numbered as the global community and international bodies have also started expressing support for the uprising and a serious financial-economic crisis is threatening stability.
Official reports this week indicated that at least $10 billion capital has left the country in the past 9 months.
Late in October, unconfirmed reports suggested that Iranian officials were sending their family members and assets abroad amid antigovernment protests that show no sign of abating. According to a report on the website of UK’s Daily Express, top officials of the Islamic Republic are reportedly attempting to secure British passports for their families. Citing an unnamed Iranian source, the report also claimed that officials have been chartering up to "five flights a day" for their families, adding that some sections of “Tehran’s main airport” have been taken over as a fast-track area for their own family and friends to escape the country.