Wednesday, 21 February, 2018

Positive outlook for Iran’s economy one year after sanctions deal

Iran’s economy is set to rebound nearly one year after global powers reached a deal to lift international sanctions placed on the country, analysts told Argaam.

Real GDP growth in Iran is forecast to grow from an estimated 0.5 percent in 2015 to 4.2 percent in 2016 and 4.6 percent in 2017, according to World Bank estimates, which factored in the removal of sanctions earlier this year.

Much of this growth will be driven by increased oil exports, foreign direct investment, and the re-establishment of access to the SWIFT network, Parham Gohari, partner and head of Dubai-based consultancy Frontier Partners predicted.

A number of key sectors are expected to benefit directly, including automotive, infrastructure, retail and consumer goods, transportation, hospitality and energy, said Gohari, who advises multinational companies on doing business in Iran.

Other industries that will likely see a boost are IT/ICT, nanotechnology and biotechnology, according to Ali Mirmohammad, senior consultant and business development manager for MENASA and Iran at Frost & Sullivan.

In the oil and gas sector, the development of downstream products from the petrochemical feedstock is seen to record significant growth, Mirmohammad noted, adding that “it is also expected that SMEs in the manufacturing sector will grow significantly.”

Despite the positive outlook, experts say several challenges remain to doing business in Iran.

“Political support for key advanced reforms is one of the major barriers in Iran in order to bolster the overall business environment,” Anthony Hobeika, CEO at Dubai-based MENA Research Partners said, adding that private sector development will depend on reforms made to ownership rules.

Other obstacles are the ability of Iran banking system to resume ties with foreign counterparts, as well as “a complicated tax structure, a multi-rate currency rate system, red tape, [and] lack of financial transparency,” Gohari added.

Among the biggest concern to investors are tensions between Gulf countries and Tehran, which have heightened in recent months.

Easing tensions would lead to a better risk environment for prospective investors, Hobeika said, adding that “investors will be more inclined to consider the GCC region when geopolitical risks are melted.”

Other the other hand, some analysts also see some Gulf states benefiting from trade with a sanctions-free Iran even if the status quo remains in the short term.

Iran-UAE trade exceeded $44.1 billion in value in the nine months of 2015.

“These figures suggest that it would be hard for Iran to replace the UAE with any other regional partner in the short run, and the UAE is unlikely to sacrifice its economic interests for a political dispute between Tehran and Riyadh,” Gohari added.

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