Improved outlook for the Iranian economy

Almost 1 year after the Nuclear Deal, Iranian authorities have particularly welcomed the statement by David Lipton, First Deputy Managing Director of the IMF, after his 3-day visit to Tehran. Reminding that his visit came at a crucial moment, Lipton said that after several years of “considerable progress in restoring macroeconomic stability under difficult circumstances,” the Iranian economy is now contemplating an improved outlook.

With inflation down from 45% in 2013 to 8% recently and a real GDP growth projected at 4-4.5% for 2016, Iran will enjoy the world’s 11th fastest economic growth and development over the medium term according to the Head of Iran’s Securities and Exchange Organization (SEO) Mohammad Fetanat, citing a report by Goldman Sachs. However, Cyceon pointed out that the stabilization of the Iranian currency (IRR) has been instrumental to such economic growth, hence the constant need for the Iranian government to maintain a tight control of liquidities and thus on inflation.

On the foreign trade side, Iran has to modernize its oil production sites and to restructure its oil industry according to a possibly long-term trend of lower oil prices. Overall, the level of oil demand by China and emerging economies will likely impact the time needed for Iran to grow as much as it wishes to. Also, investors should closely monitor to what extent the Nuclear Deal could be questioned in case of Donald Trump becoming the next US President.

According to Cyceon, the deal has indeed created tremendous foreign interest in the Iranian economy. Conversely, having simultaneously a US President and a US Congress keen on canceling the deal could jeopardize Iran’s improved outlook. Banking issues should persist as long as the US is hesitant on definitely implementing the deal, meaning there could still be a Damocles sword hanging over foreign investors’ heads.