Economic Analysis - Growth To Edge Higher On Foreign Investment - MAR 2018

BMI View: The Iranian economy will see growth accelerate over the quarters ahead, as European, Russian and Chinese commitment to improving relations with Tehran facilitate an uptick in investment. US primary sanctions, limited credit availability, and various structural impediments will nevertheless prevent a boom in the economy, particularly as hydrocarbon sector expansion slows.

We expect Iran's economic growth to tick up gradually over the quarters ahead. Amid slowing expansion in hydrocarbon production - the capacity of which has now largely been restored to pre-sanctions levels - foreign investment will increasingly emerge as a key growth driver. While a boom in foreign investment appears firmly off the cards amid persistent political uncertainty and numerous structural challenges, we believe that European, Russian and Chinese commitment to the nuclear deal will increasingly encourage external actors to grow their exposure to Iran. Consumption, meanwhile, is set to remain sluggish, weighed down by fiscal consolidation, higher inflation and still-elevated unemployment. Overall, we forecast the Iranian economy to grow by 4.3% in 2018, and by an annual average of 4.4% over the five-year period to 2022, from an estimated 3.5% in 2017.

Foreign Investment Will Tick Up

Outlook Improving, But No Boom Ahead
Iran - GDP
e/f = BMI forecast. Source: UN, BMI

This article is part of our Gulf coverage. To access this article subscribe now or sign up for free trial