Iran Country Report Mar18 - March, 2018

March 7, 2018

Iran’s economy has experienced an “impressive recovery” since international sanctions were lifted in January 2016 and delivered an annual economic growth of 12.5% in the last Persian year ended March 20. According to the Central Bank of Iran, the strong growth was driven by expanded oil sales, which presently make up 30% of Iran’s overall GDP.

The Iran accord, formally known as the Joint Comprehensive Plan of Action (JCPOA), signed in late 2015 by Iran and six world powers, removes oil export, banking and other sanctions that had crippled the Iranian economy.
US President Donald Trump has warned he will back out of the JCPOA by May if some of its terms are not toughened. However, officials from France, Germany and the US appear to be working on a plan to buy more time to save the JCPOA by addressing some of Trump's concerns over Iran's development of ballistic missiles.

If the accord entirely unravels, Iran's hopes for economic expansion in the years ahead would then take a much greater hit through impacts on trade, investment and available financing. That's a big worry for a country that has lately faced nationwide street protests largely blamed by most observers on growing economic hardship, particularly in the provinces.

But as the US and other deal signatories have continued their dispute over the effectiveness of the deal since Trump arrived in the White House, foreign business with Iran has incrementally built up. French energy major Total agreed an initial billion-dollar investment in developing part of the South Pars gas field, while several major credit lines, including a €1bn facility from Austria’s Oberbank and a €500mn financing package from France’s state investment bank BPI France, have been opened to assist Europeans doing business in Iran. Even America’s Boeing hopes Trump will eventually let it supply Iran with dozens of new jets, earning the company a handsome profit and creating jobs in the US all at the same time.

Looking at Iran’s 2017 GDP growth, the World Bank said in its January 2018 report: “Besides the effect of a slowdown in its oil sector following an exceptionally high 2016 surge, activity in the Islamic Republic of Iran was dampened by weak foreign investor confidence associated with geopolitical tensions (including new sanctions and a hardened nuclear-deal stance by the United States).” The World Bank downgraded its expectation for the finalised figure on Iranian GDP expansion in 2017 from 4.0% in its June 2017 report to only 3.6% in the January 2018 edition.

The World Bank has also forecast that GDP growth in Iran will come in at 4.0% in 2018 and edge up to 4.3% in the two years after that, with higher investment growth offset by lower oil production growth and limited access to finance.


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