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publication April 16, 2018

Iran's Economic Outlook - April 2018

The economy is expected to maintain a steady growth of slightly over 4%, increasingly based on non-oil sectors, and fueled by a recovery in consumption and investment demand and overtaking the contribution of net exports. Some signs of pickup in the construction sector -- historically a lead indicator of economic activity -- also appear to confirm this trend.

In the medium term, inflationary pressures are likely to increase due to a widening output gap and further currency depreciation, pushing the consumer price index (CPI) inflation into double-digit territory again.

Poverty is estimated to have fallen from about 13% to 8% between 2009 and 2013 (the poverty line is fixed at US$5.5 a day in 2011 PPP). This was likely due to the introduction of the universal cash transfer program in late 2010, contributing to positive consumption growth of the bottom 40% of the population, with overall consumption growth between 2009 and 2013 being negative. Poverty temporarily increased in 2014 to 10.5%, though this may be associated with a declining social assistance in real terms.