Non-oil sector, market reintegration key to Iran growth

Press TV – Iran’s top banker says the country’s economic growth was robust in the fiscal year which is coming to a close soon but further improvement will depend on the non-oil performance of the economy.

Iran’s growth last year came courtesy of the recovery in oil production following the lifting of US-led sanctions, which boosted the government’s earnings.

Oil production and exports have more than doubled since early 2016 but further rises are unlikely because the country’s fields are producing at nearly their peak capacity.

The country witnessed “strong improvements” in economic indicators, including GDP which is estimated at 4.2 percent for 2017, according to Central Bank Governor Valiollah Seif.

The GDP growth in the previous year was at a “phenomenal” rate of 12.5%, mostly due to the oil sector following the rise in production and exports, he told in his statement to Euromoney conference on Iran in Paris.

All sectors of the Iranian economy registered positive growth in 2017, during which 650,000 jobs were created and the country attained a single-digit inflation rate after a quarter of century.

“The strong balance of payment, coupled with the low level of foreign debt of the country, which is around 2% of GDP, is the source of confidence in future performance for attraction of external finance and investments, or absorbing any future BoP (balance of payment) shock,” Seif said.

“However, the growth projection for the current year will be mainly reliant on the non-oil sectors of the economy,” Seif said in his statement, read by his adviser Ahmad Azizi.

Governor of Central Bank of Iran Valiollah Seif

Despite improved economic growth in the real sector of the economy during the past years, Iranian economy is still facing high unemployment of around 12%.

Seif said foreign investment attraction and job creation are at the top of the government’s development agenda.

He cited the large size of the domestic market as well as Iran’s access to regional markets, saying there is higher growth potential for the country’s economy given a huge capacity on the demand side.

“In the aftermath of the implementation of the Joint Comprehensive Plan of Action, we are trying to plan and implement effective measures for reintegration of the Iranian economy into the global markets.”

Foreign investment and challenges

Iran concluded several finance agreements worth about 40 billion euros last year with South Korea, China, Denmark, Austria, Russia and Italy, Seif said.

“Other finance agreements are also under negotiation and we hope that more countries will join this list in near future.”

These medium- and long-term facilities have been signed for terms of up to 14 years. Seif said they will be extended to Iranian projects by banks in several countries.

The governor renewed Iran’s complaints that politics was hindering the country’s reintegration into global trade, citing Western banks’ refusal to accept Iranian business.

“Unfortunately Iran’s banking system has yet to see full benefits under the deal,” he said. “Iran is watching to see if politics helps or hinders business.”