Macroeconomic Forecast Iran

November 2006 | Macroeconomic Forecasts

Real GDP growth, underpinned by government spending, should come in at 5.8% this year and hover above the 5% mark over the forecast period. Despite the inflow of record oil revenues this year, the fiscal deficit looks set to widen to 4.74% of GDP, as the government continues its spending splurge and raids the Oil Stabilisation Fund to finance shortfalls. As such inflationary pressures will persist, given that the government has not so far demonstrated any will or credible policies to deal with the problem and has instead blamed other bodies such as the media. Government imposed restrictions on the lending rate, the overhauling of the budgetary and planning agency - effectively purging it of those dismissed by the president as 'liberals' - constitute just a few examples of the unsound nature of policymaking currently. Furthermore, UNSC sanctions clearly remain a major political risk - though we do not envisage anything beyond the symbolic if Russian and Chinese hesitance is eventually overcome - as do widening cleavages within the Iranian regime.

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