Lower Rates, Private Investments Crucial for Decent Growth

The way to ensure that Iran’s economic growth will be strengthened in the foreseeable future is for real banking interest rates to come down, says the director of the Macro-Economics and Modeling Group, affiliated to the Majlis Research Center (MRC).

“To increase economic growth, the only viable venue is to send reinsuring signals to private business, increase investments in the private sector and cut real interest rates. This can, and should, help attain growth rates of above 5% next year,” Seyyed Hadi Mousavi Nik was quoted as saying by banker.ir.

The official pointed to the World Bank’s forecast on Iran’s economic growth at 4.4% for the current fiscal year (ending March 20) and cited similar estimations made by the MRC and the International Monetary Fund which put Iran’s GDP growth rates at 6.6% and 4.5% respectively.

“A set of factors regarding supply and demand influence these estimations,” added the economist. “Therefore except for the agriculture sector, the growth of which is influenced by factors pertaining to supply, any change in other sectors of the economy in this fiscal will occur largely due to changes in the demand side.”

Citing a report by the think tank he leads, he said growth of the oil industry alone will contribute 3.9% to GDP growth, “and the main reason for that is the volume of export demand created as a result of the nuclear accord with world powers.”

According to Mousavi Nik, projections that real expenses of the government will rise in the current year is of itself a factor for growth for the services sector such as public affairs, health and education. “It is predicted that a number of other industries such as auto-making and petrochemicals will witness positive growth,” he added.

Growth in the oil and agriculture and a few sectors in industries and foreign trade, says the MRC official, will stimulate demand with improvement in the retail and wholesale sectors “which eventually will play a significant role in  GDP growth.”