Jul 17, 2014, 9:26 AM
News Code: 2721600
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Countdown to ending economic recession: Iran Daily

Tehran, July 17, IRNA - President Hassan Rouhani’s administration has promised to increase growth economic rate to 2 percent by the Iranian yearend (March 20, 2015).

After a cabinet meeting on Wednesday, Central Bank of Iran’s Governor Valiollah Seif said the economic package for ending recession will focus on granting credit facilities to the production sector, wrote 'Iran Daily' in its Opinion column on Thursday.

This is while Government Spokesman Mohammad Baqer Nobakht said several workgroups have been formed to determine the share of subsidy for each economic sector, stressing that the government will control inflation, noted the English-language paper.

The largest decline in the Iranian economy took place in 2012 when growth hit a dismal -5.8 percent. Although economic growth slowed in 2013 and reached -3.1, its downward trend continued.

The Western economic sanctions, namely oil, financial and business sanctions, were effective in triggering the sharp decline in economic growth.

These sanctions resulted in Iran’s economic recession from different routes, including the rapid decline in oil revenues, the sharp rise and prevalence of multiple exchange rates, difficulties in foreign trade, increase in risk and lack of economic security.

Since sanctions disrupted supply and were the main reasons behind the current economic recession, easing market supply is important to exit from the recessionary situation.

Some believe that recession will end with the rise in investment. However, investment must not be limited to public investment. The ground must be prepared for encouraging private sector investment and attracting foreign investment.

The latter requires a relative stability, transparency, efficient regulations and a heartening business atmosphere, which can double investment in the production sector. Economic recession is rooted in the previous administration’s mismanagement, global pressures and economic sanctions, especially on transportation, lack of new investment and sanctions on the Central Bank of Iran.

Several investors were waiting for a relative stability to resume their production activities, but they were hindered by depreciation of the rial, fluctuations in exchange rates and worsening inflation.

Under the circumstances, no new investment in the production sector was made and investment was either discouraged or transferred to non-productive sectors.

The previous government worsened the budget deficit by implementing the Subsidy Reform Plan and Mehr Housing plan, and also increased market instability by minting more money and increasing liquidity.

After several years of economic pressures, signs of economic stability emerged in the administration of Rouhani who guided Subsidy Reform Plan to its main route, returned hope to Iranians, improved Iran’s international relations and encouraged productivity.

The incumbent government is expected to give all-out support to small- and medium-scale businesses, production units and industries to pull the country out of the current critical situation.

It is also predicted that the process of quitting recession will follow a slow and steady trend till a comprehensive nuclear agreement is achieved in talks between Iran and the six world powers.

In case the agreement is reached, foreign trade and investment will increase.

On the contrary, failure to reach a final nuclear deal can hinder Iran’s economic march toward economic growth and prosperity.