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Iran 2017 Economic Forecast

Dec. 15, 2016

Vistar Business Monitor

This report presents 2017 Economic Forecast of Iran. This is an essential report for business entities and individuals, who do business in Iran or planning to enter the Iranian market. In this report a complete economic, political, and foreign policy of Iran are analyzed and assessed. The purpose of this report is to project the main economic indexes of the Iranian economy for the years 1395 (the 12 months to March 19, 2017) and 1396 (the 12 months to March 19, 2018) based on our assessments and assumptions.

The present report takes a look at the country’s macro-economic conditions and the most effective economic indicators in order to develop a better understanding of the existing conditions and make projections about the future. By examining what drove fluctuations in the most important economic indicators last year and what will impact the most important indicators of the future, predictions are made about these indicators as part of three scenarios labeled optimistic, moderate (realistic) and pessimistic.

Following surveys involving more than 50 experts, each scenario has been specifically weighed to show how likely it is to happen and what impact it would have. Twists in the implementation of the Joint Comprehensive Plan of Action (JCPOA) and oil prices are the key variables drawing a line between these scenarios.

The optimistic scenario (which has a 30 percent chance of coming true) assumes that with the rise to power of a Republican administration led by President Donald Trump in the US, the current trend in the implementation of the JCPOA, if maintained, would be the most optimistic state for the nuclear deal [Iran struck with world powers in July 2015]. Besides, eased tensions between Iran and regional countries are among other features of the optimistic scenario. Compliance with the oil deal OPEC has struck to cut output and a subsequent rise in crude prices would also be among the most important developments of this scenario.

On the domestic front, the re-election of Hassan Rouhani as president, the next government’s pursuit of détente, and formation of a team of technocrats are some of the most important features of this scenario.

The pessimistic scenario (which has a 10 percent chance of coming true) is premised on assumptions diametrically opposite to those of the optimistic view. The collapse of the JCPOA, a rise in regional tensions and the failure of the OPEC deal following the rise to power of a hardline Principlist government in Iran are among the features of this scenario.

The collapse of the nuclear deal would also see an escalation of tensions between Iran and the United States. The policy of détente pursued by the current government would be nowhere to be seen in the region and any action against Iran would be bound to draw a reaction from the Iranian government.

In the moderate scenario (which has a 60 percent chance of coming true), assumptions lie in the middle of the two extremes mentioned above. As for the JCPOA, the assumption is that on paper this grand deal would hold, but by imposing new sanctions and opting for political rhetoric the US would raise investment risk in Iran. The OPEC oil deal would remain in place too, but the supply of Shale oil by the US would drive down prices, dampening the positive impact of the OPEC deal. Tensions between regional nations would remain at the current level. And on the domestic front, the new government would not pursue détente, neither would actions taken against Iran go unanswered.

Table of Contents

Notes    3
1    Executive Summary    4
2    Iran Overview    5
2.1    General Information    5
2.2    Iran’s Strengths and Weaknesses    5
2.3    Iran Infographics    6
3    A Review of the Status Quo of Iran’s Economy    11
4    Analysis and Forecast of Major Economic Indicators    14
4.1    Three Scenarios and Assumptions for Years 1395 and 1396    14
4.2    Projected Economic Indicators in 1395 (2016 – 2017) and 1396 (2017 – 2018) in the 3 Scenarios    21
4.2.1    GDP Growth (Economic Growth)    22
4.2.2    Unemployment Rate    24
4.2.3    Government Debt    27
4.2.4    Monetary Base    30
4.2.5    Bank 1-Year Fixed Deposit Interest Rate    32
4.2.6    Money Supply    34
4.2.7    Foreign Exchange Rate    36
4.2.8    Trade    37
4.2.9    Inflation    42
4.3    Unification of Foreign Exchange Rate and Its Major Ramifications    45
4.3.1    Major consequences of the unification of foreign exchange rates    49
5    Risk Assessment    51
About Vistar Business Monitor    55

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