Iran Country Report - May, 2016

May 16, 2016

bne IntelliNews' May issue of the magazine features a cover story on Iran asking: what now? The thinking behind that question is that, in our opinion and that of many others, the opening-up of Iran is undoubtedly a huge opportunity for global investors, perhaps the last big emerging market play. But Iran should not be seen as just another emerging market, dead set on convergence with the West by unshackling market forces through neoliberal economic policies and slavishly willing to adhere to the rules invented by the West. Iran will plough its own furrow as it marches toward becoming the dominant political and most likely economic power in the Middle East.

What may surprise many who are looking at Iran for the first time is how developed the country is after two decades of US sanctions. As our cover feature notes: “The unexpected side-effect of the country’s isolation by the West is that Iran came closer to its utopian, centuries-long vision of autarchy. Iran became nearly self-sufficient in many areas of the economy.”

The economy is well developed and well diversified, unusual for a country with such high oil and gas reserves. It is the second largest economy in the Middle East and North Africa (MENA) region after Saudi Arabia, with an estimated GDP in 2015 of $394bn, according to the World Bank. It also has the second largest population of the region after Egypt, with a mostly young population of 79mn in 2015 – a characteristic so crucial for emerging market investors. Due to the lifting of the sanctions and a more business-oriented environment, Iran’s real GDP growth is projected to reach 4.2% and 4.6% in 2016 and 2017, respectively.

However, few are in total ignorance of the challenges: Iran’s achievements of the past two decades are all the more remarkable in that they happened amidst a highly corrupted, unpredictable and non-transparent bureaucratic machine, an over zealous central-command system, and in an atmosphere of fierce competition over the country’s resources by different interest groups. None of this is expected to change any time soon.

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