Economy, Business And Markets

Tayyebnia Positive About Decent Growth Rates

Finance Desk
Tayyebnia Positive About Decent Growth Rates
Tayyebnia Positive About Decent Growth Rates

As Iran is slowly moving closer to the single-digit inflation after years of hyperinflation havoc, policy and decision makers are focused on stimulating growth and creating jobs for the younger generation.

However, cautiousness about sustaining the hard-won success of taming inflation makes the economic team of President Hassan Rouhani think twice before embarking on any quantitative easing program.

Exploring such themes were the main debate points at the opening day of the 26th Annual Conference on Monetary and Exchange Rate Policies in Tehran on Tuesday.  It brought together senior bankers, senior officials and financial experts for one of the most important events of the year.  

"Integration of the financial system,'' establishing effective "corporate governance," exploring ways to facilitate the principles of  the "Resistance Economy,"  and new methods of "financing the economy," were the event's other themes.

Minister of Economy Ali Tayyebnia said the two most urgent issues for the government are tackling the credit crunch and reducing government debt, estimated at 1 quadrillion rials ($29 billion) only to the banking system.

"The other priorities are overhauling the banking system and financing the SMEs through loans," he said.

Sounding an optimistic note for the economy in the current fiscal year that started in March, Tayyebnia said conditions are in place to achieve the oft-mentioned 5% GDP growth.

"This year marks the beginning of the end of the zero growth season as the country is in a unique position to achieve decent growth and generate jobs," he said.

The close aide and confidante of the president elaborated on the unique position, saying the landmark nuclear deal signed in January between Iran and six world powers, the positive macroeconomic outlook forecast by leading international institutions and local economists and the strong momentum shared by key players in embracing the Resistance Economy will certainly raise domestic manufacturing.

The Resistance Economy is a series of tenets proposed by the Leader Ayatollah Seyyed Ali Khamenei to curb reliance on oil export revenues, empowering domestic producers and diversifying non-oil exports. Since the guidelines were released in February 2014, the Rouhani administration has come up with plans to help achieve the goals and make the economy resistant to and resilient against external shocks.

Serious Concerns

Tayyebnia sounded the alarm on some issues that he said could create serious challenges to economic growth and stability. In particular, he warned about "political polarization" which could put factional interest before national economic prosperity   

"I plead with all political factions not to take aim at the country's economic and business climate to score political points and make electoral gains,'' he said, warning of the potential divisiveness that could lead to acrimonious behavior ahead of the next presidential election in 2017.

He also expressed concern about insidious attitudes to cast doubts on the positive economic landscape this year, saying it could derail efforts to finance businesses and achieve sustainable growth rates -- two pressing needs of the struggling economy emerging from years of international sanctions and endemic mismanagement, not to mention rampant corruption.

He considered the high cost of borrowing money, the faltering conditions of local banks and their balance sheets, the flow of bank resources into unproductive sectors, and the high ratio of bad loans and toxic assets, which account 42% of banks' total resources, as the most pressing issues of the banking system and the economy at large.

Tackling Inflation

Governor of the Central Bank of Iran Valiollah Seif, the second keynote speaker at Tuesday's event, gave the tidings that the country will tame inflation and reduce it to single digits by the end of summer.

Inflation has declined from 40.4 % t in October 2013 to 11.2 % this April. The progress was largely due to the government decision to stop using resources of the CBI and other banks to fund development projects, he said.

"Our main objective is now to preserve the low inflation rate and keep it at that level," Seif said, adding that CBI monetary policy is in line with the greater economic needs.

He reinterred the CBI's commitment to and belief in prioritizing the financing of SMEs and upholding monetary discipline.

On the sharp decline in crude oil prices over the past two years, Seif expressed satisfaction that a damper had been put on the related difficulties, thanks to the lifting of the sanctions and the CBI's monetary policies. Despite the problems emanating from cheap oil "signs of economic recovery became visible last winter and is expected to gather pace this year."