By Navid Kalhor for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iran Business News.
Economic growth is generally generated by four sources: increasing private consumption, expanding private investment, higher government consumption and investment, and more exports. At present, when it comes to the first three, there is no potential for picked up economic output in Iran.
Although efforts have been made to increase private investment, the data still show that Iran is faced with an outflow of capital. Hence, the only option for the Iranian government to pursue sustainable economic growth is to elevate exports. In this vein, economists believe that if exports rise, production will also follow suit. This, in turn, will boost employment, which has long been a key challenge for successive Iranian administrations.
Mindful of the above, it should be borne in mind that the products any country usually makes are for two purposes: first for domestic consumption and second for exports. Various figures show that domestic consumption is not likely to experience an uptick due to lower disposable incomes of ordinary Iranians. Consequently, in such circumstances, the country should proceed toward exports and, in particular, non-oil exports, namely goods and services.
As stated, there are two fundamental reasons why President Hassan Rouhani’s economic team should raise exports to tackle rising unemployment in the country. Having said that, Islamic Republic of Iran Customs Administration (IRICA) reports show that the country’s trade balance surplus, which stood at about $246 million in the previous Iranian calendar year ending March 20, alarmingly reversed its course in the two consecutive quarters in the current Iranian year starting March 21. This year, imports have increased dramatically while non-oil exports have been dropping.
The high volume of oil and gas, petrochemicals and minerals, and the existence of only one main agricultural export commodity (pistachio) is a revealing testimony of the continuation of the production policy of low value-added and crude exports in Iranian industry. It is worth noting that the value of each ton of exported goods in the previous Iranian year was just about $339 per ton on average. Whereas this was $1,308 per ton for imported goods in the same corresponding period, a bit less than fourfold of the exports value.