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Iran’s Economic Outlook- October 2016


Following moderate growth in 2015 related to uncertainties regarding implementation of the Joint Comprehensive Plan of Action (JCPOA), the Iranian economy is projected to grow at an average rate of 4.5% during 2016-18 as the benefits of the removal of sanctions materialize. The medium-term prospects depend on a sustained reform agenda and increased integration with the global economy.

Outlook

Iran’s economy is expected to grow at an annual average rate of 4.6% in 2016-2018. Over the medium term (2017-2018), investment is likely to play a much larger role in generating growth on the assumption that new investment deals currently being negotiated will materialize in 2017 and 2018, and financial linkages with the rest of the world will be restored.

Meanwhile, inflation is expected to ease into single digits (8.6%) in 2016 for the first time since 1990 as a result of lower commodity prices and easing import costs in the wake of lifting of the sanctions, but could edge higher in 2017-2018 if oil prices recover.

The fiscal balance is projected to improve by 1.2 pp (percentage point) to -0.4% of GDP in 2016 as a result of an expected surge in the volume of oil exports and a parallel increase in non-oil revenues, and to move into surplus in 2017-2018. The current account surplus should start improving in 2016 and reach 4.1% in 2018 as increased energy exports more than offset the rise in imports stemming from lower trade costs and increased domestic consumption.

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