IMF Sees GDP Rise  Post Sanctions
Economy, Business And Markets

IMF Sees GDP Rise Post Sanctions

The International Monetary Fund (IMF) says the recent agreement to remove most economic sanctions on Iran will be positive news for the global economy.
According to the fund, the expected lifting of economic sanctions following Iran's nuclear deal means the combination of positive external demand, wealth, and terms-of-trade shocks would entail a cumulative 15 % increase in real GDP during the next five years relative to a baseline scenario of sustained sanctions.
Iran's return to the global oil market is expected to result in increased global supply of oil, and the removal of the sanctions will open up new trade and investment opportunities, the IMF said in its latest report issued in Dubai on Wednesday.
"Iran's reentry into the global oil market, and its increased integration into the global economy, could have far-reaching economic effects, given the large size of its economy (close to 1½% of global GDP or 18% of the GDP of the MENA region), population (78 million), and oil and gas reserves (fourth and second largest in the world, respectively)," the reports says.
"With the easing of international sanctions, the country's economic prospects have improved substantially and, through increased trade and investment, benefits are expected to flow to its economic partners as well," IMF Middle East and Central Asia Department Director Masood Ahmed said.
The IMF report said traditional economic partners such as Europe, Turkey, and the UAE stand to gain, as do China and India, whose trade with Iran increased during the sanctions period. It also projected that the CCA (Caucasus and Central Asia countries) could also benefit, especially if over time they become transit hubs for increased trade between Iran, Asia, and Europe.
"The country's growth could reach 4% in the medium term, or even higher if the easing of sanctions is accompanied by domestic economic reforms to ensure macroeconomic stability and promote inclusive growth," Ahmed said.

Saudi Deficit  
The official also reflected on the deepening economic plight of Saudi Arabia due to the unprecedented plunge in international crude prices. He said the government in the pro-western oil kingdom is looking at a wide range of possible adjustments to its spending and revenue policies to cope with the blow to its finances from cheap oil.
The IMF estimates Riyadh faces a record budget deficit of well over $100 billion this year, amounting to 21.6 % of gross domestic product, as low oil prices slash the revenues of the world's largest crude exporter. "It is very clear that Saudi Arabia needs a sizeable, structured, multi-year fiscal adjustment," Ahmed said.
The IMF report said Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies. The same is true of Bahrain and Oman in the six-member (Persian) Gulf Cooperation Council, it added. "Kuwait, Qatar and the UAE have relatively more financial assets that could support them for more than 20 years," the Washington-based lender said.
Ahmed said the fund may offer a bigger loan to Iraq next year to help stabilize the country's finances as it grapples with low oil prices, civil strife, sectarian violence, militancy and rampant corruption that have devastated the Arab country for more than three decades.

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