Iran economy could rebound to 4.4% growth if U.S. sanctions lifted -IIF
26/11/2020 09:17
By Davide Barbuscia
DUBAI, Nov 26 (Reuters) - Iran's economy could grow 4.4%
next year if U.S. President-elect Joe Biden lifts sanctions that
have contributed to a deep three-year recession, although the
COVID-19 crisis could limit foreign investment, the Institute of
International Finance (IIF) said.
Biden's victory in the Nov. 3 U.S. election has raised
chances that the United States could rejoin a deal Iran reached
with world powers in 2015, under which sanctions were lifted in
return for curbs on Iran's nuclear programme.
This is unlikely to happen overnight, however, and the
prospects remain uncertain as the adversaries would both want
additional commitments. urn:newsml:reuters.com:*:nL1N2HO4DU
Iran's rial currency has lost about 50% of its value against
the U.S. dollar in 2020, reflecting economic damage from
sanctions and the coronavirus pandemic, although it strengthened
in late October in anticipation Biden would unseat U.S.
President Donald Trump.
Iran has the highest COVID-19 death toll in the Middle East.
Trump abandoned the nuclear deal in 2018, and Tehran
responded by scaling down its compliance.
The IIF, a trade body for the global financial industry,
said that if United States lifted most of the economic sanctions
on Iran by the end of 2021, the economy could expand 4.4% next
year after an expected 6.1% contraction in 2020.
It would then grow by 6.9% in 2022 and 6% in 2023, the IIF
said, adding that if oil exports increase, Iran could see its
foreign reserves rise to $109.4 billion by the end of 2023.
Tehran has spoken optimistically about the return of foreign
companies under a new U.S. administration, but lack of financial
transparency could still curb interest from firms who had made
tentative moves to invest after the 2015 deal was struck.
urn:newsml:reuters.com:*:nL1N2IA0R5
Garbis Iradian, IIF's chief economist for the MENA region,
told Reuters foreign direct investment inflows would increase
progressively from this year's $890 million to over $6.4 billion
in 2025.
Assuming most sanctions could be lifted by late next year,
FDI is likely to remain below $2 billion in 2021, with most of
the money coming from China, Iradian said, adding: "Moreover,
the coronavirus pandemic will limit FDI inflows in 2021."
The Iranian economy would remain fragile, though "not to the
brink of collapse" if most of the sanctions remain in place, the
IIF said.
Under such a "pessimistic" scenario, Iran would post 1.8%
growth next year and its foreign reserves would steadily
decrease from about $80 billion this year to $46.9 billion by
the end of 2023.
About 90% of Iran's official reserves are frozen abroad due
to U.S. sanctions.
(Reporting by Davide Barbuscia; Editing by Catherine Evans)
((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters
Messaging: davide.barbuscia.reuters.com@reuters.net))