IMF: Iran risks return to recession if nuclear accord is derailed

By bne IntelliNews March 1, 2017

Iran risks returning to the recession it was enduring a year ago if the nuclear deal with major powers that paved the way for the present post-sanctions era comes off the rails, the International Monetary Fund said on February 27.

While the Iranian economy has experienced an “impressive recovery” since sanctions were lifted in January last year and should deliver annual growth of 6.6% in the Persian year ending on March 21, the growing tensions with the US Trump administration and related uncertainties about progress under the nuclear accord could undermine economic expansion, the IMF added.

“If the agreement is derailed, the economy could risk recession,” the IMF said in an update on Iran’s economic performance.

Iran, which has the fourth largest oil reserves in the world, has made substantial economic headway largely thanks to a doubling of its oil production since sanctions were withdrawn.

But the IMF cautioned that deteriorating relations between Tehran and Washington “could deter investment and trade with Iran and short-circuit the anticipated recovery”.

Despite Donald Trump’s hostility to the nuclear deal with Iran, the accord enjoys firm backing from the UK, Germany, France, Russia and China, which, along with the US under previous President Barack Obama, signed it.

In its report, the IMF commended the Rouhani administration in Iran for maintaining single-digit inflation - it is presently at 8.7%.

The Fund also called on Tehran to fully implement a plan drawn up with the Paris-based Financial Action Task Force, an organisation that combats money laundering and the financing of terrorism.

Iran’s efforts at plugging back into the world financial system are being hindered by some sanctions against Tehran retained by the US in response to alleged Iranian sponsorship of regional terrorism. Banks linked to the American financial system are wary that by getting involved in trade and investment centred on the Islamic Republic they could unwittingly end up assisting money laundering conducted to aid terrorism.

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