Central Bank of Iran Puts 2017-18 Growth at 5%

The Central Bank of Iran has forecast an economic growth of at least 5% for the current Iranian year that ends on March 20, 2018.

"Most of the economic sectors have improved remarkably during the current fiscal year (started March 21), therefore the country will register at least a 5% economic growth by the end of the year," CBI Governor Valiollah Seif said during an interview with the state television late Thursday.

According to CBI's official figures, the Iranian economy had expanded by 12.5% during the previous Iranian year to March 20, 2017, but that bumper figure is largely attributed to the rise in Iran's oil exports in the wake of sanctions relief.

The country faces a challenge in maintaining a steady growth, as global oil prices have slumped and domestic production fell on hard times.   

Seif noted that the country will not witness another dramatic rise in oil production since the sector has already reached its full potential following the implementation of Iran's nuclear deal in January 2016, following which the country was exempted from an OPEC deal to cut production for boosting global oil prices.  

The World Bank in its latest Global Economic Prospects report has predicted that Iran's economy will grow 4% in 2017 while the country will register a respective growth of 4.1% and 4.2% in the following two years.  

Iran’s economy emerged from recession in the fiscal 2014-15, with a 3% growth after two years of recession when the economy contracted 5.8% and 1.9% back to back. Growth for 2015-16 has been put at -1.6% by CBI and 0.9% by the Statistical Center of Iran.

NPL Ratio

The CBI governor addressed the old issue of large bank debtors, touting it as one the biggest problems of the banking system.

"Banks' credit crunch and their inability to allocate sufficient loans stem from a number of reasons such as non-performing loans, the volume of which is considerably higher than the global standards," he said.

According to the statistics, when President Hassan Rouhani's administration took office in 2013, the banking system's non-performing loans accounted for 15.1% of all the allocated loans while in four years, the figure has been brought down to 11%. However, it is still far higher than the global standards.

Noting that the latest figure for NPLs is 1.1 quadrillion rials ($29 billion), Seif said the acceptable NPL ratio in most countries is about 3-4% while anything higher is totally irrational and increases the banks' expenses significantly.