IMF Forecasts Drop in Iran Debt, Broad Money Growth

The international Monetary Fund’s latest “Regional Outlook" for the Middle East and Central Asia projects the growth of Iran’s broad money at 12.5% and 10.2% in 2016 and  2017 respectively , marking a continued downward trajectory from 2015 when the figure was 15.3%.

IMF also forecasts a decline in Iranian government’s average gross debt in 2016. While the government’s gross debts amounted to 15.9% of the GDP, it is predicted to stand at 14.9% for 2016, and 15% in 2017. Average government gross debt in the MENAP (Middle East, North Africa, Afghanistan and Pakistan) region is estimated to reach 43% of the region’s total  GDP– 5.3% higher than 2015.

Total amount of Iran’s gross official reserves is predicted to surge by $23.3 billion in 2016, reaching $156 billion. The amount is expected to stand at $178.8 billion in 2017.

Current account balance is estimated to reach $17.2 billion in 2016, $9 billion more than in 2015. However, the current account balance of Iran is estimated to stand at $14.6 billion in 2017.

The Washington-based lender also forecasts the Iranian government’s general fiscal balance to account for -1.1% of Gross Domestic Product. The amount is estimated to lower-1% of GDP in 2017.

Iran’s headline growth has been revised up to 4.5% this year, “owing to faster-than-expected increases in oil production and exports following the unwinding of sanctions,” the report reads.

The Fund also says oil output has risen to 3.6 million barrels per day, resulting in positive spillovers to the non-oil economy, although the recovery in oil output is expected to taper sharply next year as production approaches pre-sanctions levels.

Iran exports of goods and services amounted to $78.3 billion in 2015, according to the Fund. The amount is expected to reach $95.2 billion in 2016 and $103 billion in 2017.

“The growth dividend from the lifting of sanctions is materializing only gradually, with investors remaining cautious, and reintegration into global financial markets and domestic reforms proceeding slowly.”

In early October, IMF staff estimated that the non-oil fiscal deficit in 2016-17 will increase by 0.5 % of non-oil GDP to reach 8.9 % of non-oil GDP (or 7.7 %of total GDP).

Inflation

The inflation rate in Iran will drop to 7.2% in 2017 from 7.4% in the current year, according to the IMF.  

“Iran is making further headway in its disinflation program, bringing consumer price increases to single digits for the first time,” in a long time, notes the body.

 The IMF had earlier predicted that the unemployment rate would dip slightly to reach 11.2% in 2017 from 2016's 11.3%. This comes as unemployment in Iran had taken a turn for the worst in the current year, with joblessness reaching 11.3%, higher than the 10.8% in the prior year.

The Iranian government is implementing far-reaching, ambitious, reforms to support a sustained acceleration in growth, according to the IMF. It plans to clear government arrears, recapitalizes banks and strengthen supervisory powers.