What do you think will happen in Iran’s economy in the Iranian New Year (starting March 20)?
"Iran is going through a second phase of economic normalization," said former Central Bank of Iran governor, Tahmasb Mazaheri, on Tuesday. "It is recovering from recession and opening up to the world economy."
The conference themed "Iran's Economic Outlook" was organized by our parent group, Donya-e-Eqtesad, in Tehran.
The event examined the prospects of Iran's oil, equity, foreign exchange, gold and housing markets, as well as the general state of the economy, in the coming Iranian year.
The economic implication of Iran’s historic nuclear deal on these markets and the wider economy was a hot topic of discussion.
Iran emerged from years of economic isolation in January when world powers led by the United States and the European Union lifted sanctions in return for curbs on Tehran's nuclear program.
Around 150 Iranian businessmen attended the event, which was held for the third year in a row.
Hossein Abdoh-Tabrizi, adviser to the minister of roads and urban development, made his predictions regarding the economy.
According to Abdoh-Tabrizi, what will happen depends heavily on the price of oil and what the government can do in the real and financial economy. Abdoh-Tabrizi said he would consider the budget’s $40 per barrel oil price as a right assumption. He added that commodities have bottomed and most forecasts point to rising prices in the upcoming year, a plus for Iran.
"The government will maintain its grip on inflation and continue to hold it near 10% per year. I think inflation will be between 10 and 12% next year," he said.
Abdoh-Tabrizi said it would hold rial’s value as stable as possible, adding that despite this, the dollar will gain versus rial from its current 34,000 rials per dollar, to 40,000 rials.
The economist said the key point is what the government will do to make banks lend more.
“All data show there is a real credit crunch,” he said.
The lack of liquidity in the system is keeping interest rates high, making bank deposits the most lucrative avenue for investment under the current circumstances.
Mohammad Fetanat, president of the Securities and Exchange Organization of Iran, said due to the higher returns in banking sector, equities will continue to underperform.
“I don’t think the CBI will find much success in bringing down interest rates in the upcoming year. Our review of corporate budgets shows they will grow their earnings by 8% for the upcoming year,” he said.
This growth is feasible, despite the 8.5% drop projected in petrochemical industry’s earnings. The sector makes up more than 20% of Iran’s equity markets. Hence, equities will grow next year, though threats remain.
Fetanat noted that over 5% of companies listed in Tehran Stock Exchange are bankrupt, “regrettably most of them are large investment holdings that need restructuring”.
These will prevent the equities from performing well, though Iran will grow more than expectations.
Abdoh-Tabrizi said lending in the housing market will pick up next year, as regulations now allow all banks to participate in this market.
He, however, forecast that unemployment will continue to haunt the administration of President Hassan Rouhani, saying unemployment would remain high, as participation in the economy is low.
Only 40% of working-age Iranians are active in the job market and 21.5 million have jobs. An Iranian worker supports 3.7 people on average, while the figure is 2.2 people in Turkey.