March 17, 2023
The level of production in Iran has hit its lowest point in recent years due to an increase in energy prices and the decline of the national currency – in addition to the cumulative impact of US sanctions.
According to the latest report released by the Research Center of the Iran Chamber of Commerce, growing unemployment as well as internet shutdowns also contributed to the unprecedented crisis in the production sector.
The report is based on the Purchasing Managers Index (PMI), which is a measure of the prevailing direction of economic trends in the manufacturing and service sectors. The purpose of the index is to summarize whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. It is supposed to provide information and useful insight about current and future business conditions. The PMI is derived from a monthly survey of supply chain managers across many industries and is expressed in a number from zero to 100.
The latest report shows the country’s production sector has been contracting at an alarming speed, with the index dropping below 40, while a number less than 50 means economic contraction.
The report said a new issue that has been added to the equation is the restricted supply of energy available to producers.
Iran has been facing a serious natural gas shortage this winter as output at its gasfields gradually declines due to lack of investments and Western technology. To keep homes warm, the government reduces gas supplies to steelmakers, refineries and a host of medium-sized enterprises.
Some of the other factors contributing to the drop in PMI are growing unemployment, fewer customer orders, and fewer exports of goods and services, as well as lower sales in general.
The head of the Research Center of Iran Chamber of Commerce, Mohammad Ghasemi, told Donya-e-Eqtesad daily the new report shows the Islamic Republic “has been removed from the map of international trade,” warning that “apart from its consequences for our economic growth, this has risks for our national security.”
“The most painful result of these studies … is that the ‘existence or absence of Iran’s economy’ does not have much impact on the international economy,” he said, noting that it becomes very easy for the international community to inflict damage on the country’s economy. This means that sanctions and embargoes on Iran are irrelevant to the global supply chain and economy. In other words, contrary to what the regime has been saying, the West does not suffer harm from the sanctions on Iran.
