Iran's Gov't Package Can End Recession, Boost Economy

Tehran, Oct 12, IRNA - Fighting economic recession is the foremost challenge for the government of President Hassan Rouhani, said an official. Abolfazl Hejazi, a board member of Iran’s Chamber of Commerce, Industries, Mines & Agriculture made the statement in an exclusive interview with Sunday's edition of 'Iran Daily'. Hejazi believes Rouhani managed to restore calm to the national economy more than a year after taking office and now he will be able to help it rebound if the parliament gives the go-ahead for his economic package. Elaborating on the daily's question regarding the government’s economic package, Hejazi said that Iran’s economy plunged into recession in 2012 and still suffers from its repercussions. Based on Central Bank of Iran figures, the downturn and runaway inflation lasting for two consecutive years have been unprecedented in the past three decades. Even during the eight-year war with Iraq in the 1980s, Iran didn’t experience grave economic slowdown for two consecutive years with negative growth and record high inflation of over 40 percent. To emerge from such dire situation, the government drew up an economic package and presented it to the Majlis. The plan, which encompasses a wide range of areas, particularly aims to boost foreign trade, stabilize the forex market and give leading economic entities a more dominant role. More financial assistance for economic units by the banks is one of the most eye-catching elements of the package which many experts have supported since in recent years the banks have became directly involved in trade and other similar activities instead of financing economic units to do so which drove many to bankruptcy. That’s why the government, in its package, has ordered banks to sell their excess properties to have more funds for granting loans to plants and other manufacturing units. If the Majlis approves the package, it will be able to remove obstacles to production and end recession. In reply to the question on how successful the government has been in helping the economy recover in the past year, Hejazi said that the government’s attempts to improve ties with regional and European countries had positive impacts on the economy. In fact, President Rouhani has taken positive steps to stabilize the ailing economy through diplomacy. Moreover, the government managed to restore tranquility to various markets by containing the forex market, which was subject to wild fluctuations for months, rebuild trust among economic and industry players in the private sector. In general, the government’s measures turned the negative economic growth of 5.6 percent, which was the legacy of its predecessor, to the positive growth of 4.6 percent. Although such a remarkable jump should not be translated into economic boom, it can indicate an end to recession. On whether he agrees economists' belief that mismanagement in the previous government damaged the economy more than Western sanctions, Hejazi said it definitely has. Wild fluctuations in forex rate during the term of president Mahmoud Ahmadinejad and the earlier stabilization of the forex rate during the tenure of president Mohammad Khatami dealt the severest blow to export and consequently to the economy. Fixed hard currency rate undermined Iranian producers against their foreign rivals due to high inflation and soaring production costs. Besides, imported goods were sold at much lower prices in the market compared to Iranian products due the low forex rate. This led to a great hike in import. The Ahmadinejad administration delivered fatal blows to the economy and eroded the credibility of traders by imposing cumbersome restrictions and laws such as banning the import or export of certain products. Such measures damaged the economy more than any sanctions. Replying to the question on what the government has done so far to boost export, Hejaji said, Iran’s export saw a 21 percent growth in the first five months of current Iranian year (started March 21) compared to the same period a year before and exceeded $19.5 billion. During the same period, the volume of import reached nearly $22 billion which is 33.5 percent higher than the figure for the same time span a year before. Although export was higher than last year thanks to the government’s efforts to keep the dollar at 32,000 rials, the gap between export and import is somehow worrisome as the balance of trade is now negative. The dollar has been maintained at a reasonable rate against the rial and perfectly matched with the inflation rate. This has bolstered export and if the government sticks to the same forex policy, trade balance will become positive in two years./end