Economy, Domestic Economy

Pluses and Minuses

Pluses and  MinusesPluses and  Minuses

Addressing the third meeting of Iran Chamber of Commerce, Industries, Mines and Agriculture on Sunday, Masoud Nili, senior economist and advisor to President Hassan Rouhani outlined the challenges and opportunities facing the economy after the sanctions (imposed by the West over Iran’s nuclear energy program) are lifted.

“The private sector should not be weakened as a result of the lifting of sanctions. The government should lay the foundation for a stronger private sector role in investment and exports in the post-sanctions era,” he was quoted by IRNA as saying.

He invited private sector representatives in the chamber to interact with the government and voice their demands in the areas of exports, business environment and regulations. “The government is open to the private sector’s suggestions and requests,” he said.

According to Nili, increase in foreign currency resources, access to international markets, interaction between Iranian and international banks, lower political risk which would in turn translate into lower economic risks, foreign financing, foreign direct investment, transfer of technology and a boost to non-oil exports are among major opportunities in the post-sanctions era.

However, he warned that the inflow of foreign currency should not lead to unrestrained import of finished products, but rather help expand production and export of value added goods.

“Also, foreign investments should not only target Iran’s 80-million market but focus must be shifted to using the foreign investments to gain stronger presence in international markets,” he added.

 Need for Sustainable Growth

The need for sustainable economic development was another central theme of Nili’s remarks.  “There are at least three main reasons why the country needs sustainable economic growth in the coming years: to create employment, improve the living standard and maintain a strong foothold in the region,” Nili said.

According to the economist, the number of employed people was 20.5 million in 2002 and remained more or less the same until 2012. “This is while about 7 million people joined the working age population during the 10-year period,” he noted.

The dwindling standard of living in urban and rural areas was mentioned by the expert as another major concern which necessitates sustainable economic growth. “Real income per person has constantly declined since 2007, having reduced by 15.4% for urban households and 29.6% for rural households,” he noted.

Without sustainable economic growth, Nili said the country is unlikely to achieve the objectives of becoming the biggest economic and scientific power in the region as per 2025 Vision Plan. “The plan envisions achieving 8% average economic growth in the Fifth Five-Year Economic Development Plan (2011-2016). But, our economy grew merely 3.1% last fiscal year (ended March 20). This is while some neighboring countries experienced two-digit growths,” he noted.

Lower inflow of foreign currency as a result of the global decline in oil prices, as well as lack of sufficient investments, particularly in energy and transportation sectors were mentioned by the economist as major challenges in the way of achieving economic growth.

“The average government investment in these sectors was 8.9% of the budget between the years 1997 to 2004. The figure fell to 5.5% in the subsequent years despite experiencing record high oil revenues during the period,” he said.

According to Nili, the informal economy, high inflation, business environment issues, shortage of water and natural resources, and lack of demand in the domestic markets are other challenges the economy is facing.