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IMF: Prospects for Iran economy in 2016 brighter

IMF: Prospects for Iran economy in 2016 brighter

Date: 22 December 2015 00:42

Baku, Azerbaijan, Dec. 22

By Dalga Khatinoglu - Trend:

International Monetary Fund released a report on Dec.21, saying that Iran’s GDP growth is expected to be between 0.5 to -0.5 percent in current year.

“The sharp decline in global oil prices, tight corporate and bank balance sheets, and postponed consumption and investment decisions ahead of the expected lifting of economic sanctions, have significantly slowed down economic activity since the fourth quarter of 2014/15”, the report, published on IMF’s official website said.

IMF says that real GDP growth is projected to decline from 3 percent in 2014/15 to somewhere between 0.5 to -0.5 percent in 2015/16. “Twelve-month (point-to-point) inflation has declined to around 10 percent in recent months, largely reflecting lower food and beverage inflation, and the inflation rate is expected to remain close to 14 percent by year-end”.

The Fund believes that prospects for 2016/17 are brighter, owing to the prospective lifting of economic sanctions.

Higher oil production, lower costs for trade and financial transactions, and restored access to foreign assets, are expected to lift real GDP to about 4–5.5 percent next year.

Much of the acceleration in growth will also depend on the spillovers from increased oil production to the rest of the economy. Higher oil revenue and terms of trade, and renewed access to foreign assets and capital can lead to appreciation pressures on the real exchange rate.

The report added that continued gradual fiscal consolidation - including by sustaining tax revenue mobilization and subsidy reform efforts - and prudent monetary policy, anchored by the authorities’ goal of achieving single-digit inflation by the end of 2016/17, can mitigate these upward pressures. “With reforms to the policy framework, bank balance sheets, and taxation, real GDP growth would stabilize at around 4 percent over the medium term. Comprehensive reforms to the business environment are needed over the medium term to ensure that the expected lifting of economic sanctions has a significant impact on confidence and investment and places the economy on a higher and more inclusive growth trajectory”.

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