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Iran Country Risk Report Q4 2016

  • July 2016
  • -
  • Business Monitor International
  • -
  • 39 pages

Core Views

Iran will be one of the fastest growing economies in the region overthe next five years as investment comes into the country followingthe removal of sanctions.Declining oil prices will force the government to cut current spendingand investment in the country's infrastructure sector in 2016,which will result in slow expansion of private consumption and fixedinvestment.Downside pressure on the Iranian rial will remain prominent, and theunit will remain sensitive to developments in nuclear negotiationsover the coming quarters.

Table Of Contents

Iran Country Risk Report Q4 2016
Executive Summary. 5
Core Views5
Key Risks..5
Chapter 1: Economic Outlook 7
SWOT Analysis.. 7
BMI Economic Risk Index 7
Economic Growth Outlook. 8
One Of MENA's Bright Spots8
Iran's economy will see a notable acceleration in growth in 2016 and beyond following the removal of most sanctions in Q116. Given
huge infrastructure deficits and other major impediments such as corruption, growth will be limited to around 5-6% over the coming
years.
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS.9
TABLE: PRIVATE CONSUMPTION FORECASTS.9
TABLE: GOVERNMENT CONSUMPTION FORECASTS..9
TABLE: FIXED INVESTMENT FORECASTS.10
TABLE: NET EXPORTS FORECASTS..10
Monetary Policy.. 11
Further Disinflation Ahead..11
CPI Inflation in Iran will continue to reach new lows as the removal of sanctions and slower depreciation of the rial take hold and the
impact of subsidy cuts wear off. This will result in increasing popularity for President Rouhani, bolstering is position ahead of elections in
June 2017 which we expect him to win.
Monetary Policy Framework 11
TABLE: MONETARY POLICY12
Economic Growth Outlook II.. 12
Iran After Sanctions: Longer To Wait Before Investment Boom.12
Investment into Iran faces numerous impediments even five months after the removal of most sanctions on the economy. Given
huge infrastructure deficits and other major obstacles such as corruption, the economy will not undergo a boom - rather a steady
acceleration.
Currency Forecast. 14
IRR - Moderate Depreciation Coming..14
The Iranian rial is in the midst of a period of relative stability with only modest depreciation over the coming quarters. This contrasts
starkly with the rapid depreciation seen over the past five years as the nuclear deal, greater foreign investment and an improving
economy mitigate some of the forces to the downside.
TABLE: BMI CURRENCY FORECAST.. 15
Chapter 2: 10-Year Forecast. 17
The Iranian Economy To 2025 17
Range Of Problems To Mitigate Impact Of Nuclear Deal..17
The deal over Iran's nuclear programme will bolster the country's economic growth prospects. However, the inability to fully exploit Iran's
enormous oil and gas wealth and a challenging operational environment will lead to slow economic growth over the next 10 years.
TABLE: LONG-TERM MACROECONOMIC FORECASTS.17
Chapter 3: Political Outlook. 19
SWOT Analysis 19
BMI Political Risk Index. 19
Domestic Politics.. 20
Huge Swing To Moderates Ahead Of Presidential Elections.20
The results of the runoffs in Iran's parliamentary elections show an even larger swing in favour of the moderate and reformist camp
within Iranian politics than the first round of voting, offering a major boost to President Rouhani following the nuclear deal and ahead of
p residential elections in June 2017, which we expect him to win.
TABLE: POLITICAL OVERVIEW..20
Long-Term Political Outlook.. 21
Hardliners To Maintain Control, But Power Struggle Likely..21
Iran's hardliners will retain their hold on power over the coming decade, although moderates will continue to push for greater political
and social liberalisation. Even if the relatively moderate President Hassan Rouhani wins re-election in 2017, the main institutions of
power, namely the Supreme Leader, Assembly of Experts, and Revolutionary Guard, will remain under conservative control. Economic
necessity dictated a nuclear deal between Iran and the West in 2015, but risks to the deal collapsing will rise over the coming years,
especially if a hardliner is elected president in 2017 or is selected as the next Supreme Leader after Ayatollah Ali Khamenei.
Chapter 4: Operational Risk. 25
SWOT Analysis 25
Operational Risk Index.. 25
Operational Risk. 26
TABLE: OPERATIONAL RISK26
Market Size And Utilities 27
TABLE: MIDDLE EAST AND NORTH AFRICA - MARKET SIZE AND UTILITIES RISK. 27
Labour Costs 31
TABLE: REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE31
Chapter 5: BMI Global Macro Outlook 35
Global Macro Outlook. 35
Brexit Risk Casts A Long Shadow..35
TABLE: GLOBAL ASSUMPTIONS.. 35
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %36
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %..37
TABLE: MACROECONOMIC DATA and FORECASTS.39

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