Iran’s economy faces tough years ahead despite a nuclear deal with world powers that the government hoped would spur investment and revive stagnant growth, ministers have warned.
Speaking to members of parliament on Monday and yesterday, the industry and interior ministers painted a bleak picture of chronic underinvestment, surging inflation and unemployment in the Islamic republic.
Interior Minister Abdolreza Rahmani Fazli warned on Monday that the country may achieve growth of only between 1.5% and3% per annum.
“With that sort of growth, unemployment and inflation will double in the short term. We need foreign investment,” he said.
His predictions fall far short of the growth target of 8% President Hassan Rouhani set in January to tackle double-figure inflation and high unemployment.
Rouhani’s government had hoped the lifting of economic sanctions following last year’s nuclear deal would trigger an influx of billions of dollars from overseas to boost growth and create jobs in a country where around a quarter of young people are out of work.
Iran needs annual foreign investment of $30bn-$50bn to reach the 8% growth target and cash in on the nuclear deal, Rouhani told parliament in January, a day after implementation of the historic agreement.
But Rahmani Fazli said a total of 3.5mn Iranians - some 11 % of the workforce – are unemployed.
“I myself have three unemployed university graduates at home,” he said.
New investment cannot come soon enough for some sectors.
“Gradually increasing in the industrial and mining sector between 2000 and 2011, investment has fallen since 2012,” Industry Minister Mohammad Reza Nematzadeh told parliament yesterday. The lack of investment had created “a catastrophe in the industrial sector”, he said.
He emphasised government efforts to help, noting that 12 industrial projects with foreign investment of $500mn had been approved since the deal came into effect in mid-January.
Major Western powers said on May 20 that they back doing business with Tehran.
But many sanctions remain, deterring potential business partners who fear being hit by punishing US fines.
Low oil prices and years of US and European Union sanctions that barred much of Iran’s foreign oil sales have hammered the country’s income from crude.
Its economy grew by less than 1 % in 2015.
“Concerning economic prosperity, Iran is ranked 106 out of 129 countries, which is the sign of a problem,” Nematzadeh told MPs.