Iran’s Economy Did Not Grow in 2020

The International Monetary Fund (IMF) earlier this month released a report updating its estimate of Iran’s GDP growth in 2020 from a 4.99 percent contraction (projected in October 2020) to 1.5 percent growth. In a year when most economies shrank at unprecedented rates, did the economy of the Islamic Republic – under tough U.S. sanctions and hit hard by COVID-19 – really grow? Official data published by Tehran indicate, contra the IMF, that the answer is no.

In Iran, two entities report GDP estimates: the Statistical Center of Iran and the Central Bank of Iran (CBI). In its April report, the IMF states that it gets its data from the CBI. The quarterly data provided by the CBI and the Statistical Center help devise GDP estimates.

The Persian calendar year starts in the third week of March, though the CBI and the Statistical Center have yet to release figures for the year’s fourth quarter. According to the CBI’s data, the Islamic Republic’s economy grew 0.1 percent in the Western calendar year of 2020, while the Statistical Center estimates that the economy shrank 2.1 percent. Neither of these two datasets support the IMF’s 1.5 percent estimate, but the CBI’s estimate comes closer to it.

The IMF’s estimate may be based on the Persian calendar year. In its report, the IMF lists Iran as one of the countries with a reporting period that diverges from the Western calendar year. As a result, what the IMF presents as the 2020 estimate may be a projection of the April 2020–March 2021 results.

CBI and Statistical Center Estimates of Iran’s GDP

Source: Central Bank of Iran and Statistical Center of Iran

The data published by the CBI and the Statistical Center usually do not fully match. Over the last few quarters, however, the estimates published by the two entities have diverged significantly. The differences between the two estimates beg the question of where their data come from. The detailed sectoral data provided by the Statistical Center and the CBI may provide an answer.

Between the spring and fall of 2020, the first three quarters of the Persian year, Iran’s economy grew 2.2 percent year over year, according to the CBI. However, the Statistical Center of Iran reports that the country’s economy shrank 1.2 percent during the same period.

Source: Reports by the Central Bank of Iran and Statistical Center of Iran

The CBI’s estimates are higher than the Statistical Center’s for most sectors. In sectors such as mining and agriculture, the differences in estimates are only around one or two percentage points. In larger sectors, such as manufacturing, the difference widens. The Statistical Center estimates that in the spring–fall 2020 period, Iran’s manufacturing production grew only 0.8 percent. The CBI estimates that it grew 7.8 percent in value – almost 10 times the Statistical Center’s figure.

Similarly, according to the CBI, the service sector, which accounts for more than half of Iran’s GDP, shrank by 0.3 percent. The Statistical Center estimates that the sector shrank by 3.3 percent – 11 times the CBI’s estimate.

The same pattern appears in the oil and gas sector. The CBI estimates 3.9 percent growth, while the Statistical Center estimates a 2.4 percent contraction.

To be sure, media reports have provided a wide range of estimates regarding how much oil Iran exported in 2020. However, given Tehran’s refusal to provide exact figures and efforts to hide the identity and destination of its oil tankers, the best indicator of Iran’s oil exports may stem from the country’s budget realization rate, the ratio of materialized revenue to expected revenue in the budget.

The latest report by Iran’s Ministry of Economy, leaked by a hacker group, shows that from April 2020 to January 2021, the government’s revenue from exports of crude oil and oil condensates was one-third of its revenue in the April 2019–January 2020 period. If the oil revenue realization rate serves as a proxy for the oil and gas sector’s production in Iran, the number does not support the 3.9 percent growth claimed by the CBI. It is more in line with the Statistical Center’s estimate of a 2.4 percent contraction.

Which estimates are closer to reality? It is difficult to say, but there are some clues. For example, the Statistical Center’s unemployment data show that the labor force participation rate in the fall of 2020 was 41.4 percent – 2.9 percentage points lower than in the fall of 2019. The number of people working in the fall of 2020 was 24.4 million, 1 million fewer than in the previous year.

Likewise, in the fall of 2020, 800,000 fewer people worked in the service sector than in the fall of 2019. According to Iran’s Ministry of Economy, in the April 2020–February 2021 period, Iran’s non-oil exports dropped 20 percent, and Iran’s imports dropped 15.5 percent.

While these numbers are not conclusive evidence, they are more in line with the Statistical Center’s GDP estimates.

In any event, the data published by the Statistical Center of Iran and the CBI do not show that Iran’s economy grew 1.5 percent in 2020. The IMF may have over-projected Iran’s GDP growth for the 2020–2021 Persian calendar year. The IMF, researchers, and policymakers should rely on the lower of the two figures – the Statistical Center’s estimate – for 2020.

Saeed Ghasseminejad is a senior advisor on Iran and financial economics at the Foundation for Defense of Democracies (FDD), where he contributes to FDD’s Iran Program and Center on Economic and Financial Power (CEFP). For more analysis from Saeed, the Iran Program, and CEFP, please subscribe HERE. Follow Saeed on Twitter @SGhasseminejad. Follow FDD on Twitter @FDD and @FDD_Iran and @FDD_CEFP. FDD is a Washington, DC-based, non-partisan research institute focusing on national security and foreign policy.