Returning To Growth In 2014


BMI View: We project Iran's economy to expand by 2.8% and 3.4% in real terms in 2014 and 2015, respectively, from our estimate of a 3.5% contraction in 2013. Improving relations with the West and better macroeconomic management, coupled with low base effects, will lead to an improved outlook for exports and increased business and consumer confidence. That said, the macroeconomic outlook will remain highly susceptible by developments in negotiations on the nuclear programme.

We forecast Iran's economy to expand by 2.8% and 3.4% in real terms in 2014 and 2015, respectively, from our estimate of a 3.5% contraction in 2013. Iran and the 5+1 powers (the United States, Russia, China, France, Britain and Germany) clinched an interim deal on the Islamic Republic's nuclear programme on November 24, including gains of approximately US$7bn in sanctions relief (see 'Interim Nuclear Deal: Key Implications', November 25 2013). This will result in an improved outlook for exports, as well as increased confidence among investors and consumers. In addition, we see macroeconomic management improving significantly during the presidency of Hassan Rouhani, which will lead to a gradual decline of price pressures over the coming years. We see private consumption and fixed investment as the major drivers of growth in 2014 and 2015.

Private Consumption Outlook

Private Consumption And Fixed Investment Driving Growth
Iran - Components of GDP (IRRtrn) & Real GDP Growth

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This article is tagged to:
Sector: Country Risk
Geography: Iran