Iran’s Economic Outlook- July 2016

How is Iran Reacting to Low Oil Prices?

The slump in oil prices has hurt the Iranian economy but by less than other oil producers in the region. The reason is that compared to other oil producers, the Iranian economy is more diversified, and therefore less dependent on oil revenues. Oil accounts for about 30 % of government revenues.

To maintain market share, Iran’s oil production has increased since January 16, 2016 when implementation of the Joint Comprehensive Plan of Action (JCPOA) and lifting of sanctions began. Some 600,000 b/d has been added so far and the government plans to raise it up to 800,000 b/d by the summer of 2016, reaching pre-sanction levels (prior to 2014).

As part of the JCPOA, some $30 billion of frozen assets have been released, allowing the government to access funds and assets abroad. The government has taken some actions to mitigate the impact of low oil prices on its budget including raising taxes on parastatal organizations which were previously exempt.