Iran Country Report Apr17 - April, 2017

May 16, 2017

Iranian economic growth in the first half of the Persian year (started March 20, 2016) amounted to 7.4%, according to the Central Bank of Iran (CBI) Governor Valiollah Seif. This is an improvement on the forecast 4.4% delivered over the whole of the previous year.

While the Iranian economy has experienced an “impressive recovery” since international sanctions were lifted in January last year and should deliver annual growth of 6.6% in the Persian year ended 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 noted.

Iran’s economy is only now starting to see the benefits of foreign investment. For instance, auto sales data suggest that Iran now accounts for 86.5% of all sold PSA-branded vehicles in the wider Middle East and North Africa region thanks to its Iran re-entry. In the year that followed the January 2015 removal of sanctions, over 200 foreign investors invested cash in the main indices.

Iran has been slowly negotiating deals with several aircraft manufacturers including France-based Airbus and America’s Boeing since sanctions against Tehran were removed. National flagship carrier IranAir finalised a deal to buy 20 turboprop aeroplanes from Airbus subsidiary ATR. The deal between the two sides is estimated to be worth €540mn at the full list price.

Having the fourth largest oil reserves in the world has made Iran substantial economic headway largely thanks to a doubling of its oil production since sanctions were withdraw. But the IMF cautioned that deteriorating relations between Tehran and Washington “could deter investment and trade with Iran and short-circuit the anticipated recovery”.

President Hassan Rouhani, currently campaigning for re-election, is looking to prove that his administration is making good progress in breaking through various banking impasses, largely caused by unilateral sanctions maintained by Washington, that are continuing to restrict and undermine trade relations with the West. Rouhani administration has thus far maintained single-digit inflation which is currently at 9.5%

For its part, Iran wants to open up credit lines with countries where it is unlikely to come into conflict with the US Office of Foreign Assets Control (OFAC).
Iran's priorities include new energies, railways, ports and agriculture, Larijani added.

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