IMF Executive Board Concludes 2016 Article IV Consultation with the Islamic Republic of Iran
IMF News, February 27, 2017
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- Published: February 27, 2017
Economic performance in 2016/17
- Real GDP grew by 7.4 percent in the first half 2016/17, rebounding from recession in 2015/16.
- Real non-oil sector growth averaged 0.9 percent, reflecting continued difficulties in access to finance and domestic financial sector and structural weaknesses.
- Inflation declined to single digits and has hovered in the 9.5 percent range, year-on-year, since mid-2016.
- Foreign exchange market stabilized, with some volatility toward end-2016 before recovering in January 2017; the spread between the official and the market rate narrowed to about 15 percent.
- Growth rebound was supported by higher oil production.
Projections and outlook
- Growth is projected to stabilize at 4.5 percent over the medium-term as the recovery broadens.
- Real GDP projections:
- 2016/17: 6.6 percent
- 2017/18: 3.3 percent (as oil production remains at the OPEC target)
- Inflation projections:
- Expected to temporarily rise to 11.9 percent (year-on-year) by end-2017/18 due to recent liquidity growth and pass-through from exchange rate depreciation.
- Expected to return to single digits thereafter on the back of prudent fiscal and monetary policies.
- Current account: forecast to remain in surplus as higher exports offset pick-up in imports related to investment.
- Labor market: pace of job creation lags that needed to absorb large number of new entrants; unemployment remains high.
- Longer-term drivers: higher FDI and gradual improvement in domestic financial conditions expected to drive investment and stronger non-oil sector growth.
Executive Board assessment — findings and policy recommendations
- Commendations:
- Directors commended authorities for: achieving an impressive recovery in economic growth after lifting of nuclear sanctions in 2016; maintaining inflation in single digits; stabilizing the foreign exchange market.
- Macro policy emphasis:
- Maintain prudent macroeconomic policies and build buffers given renewed uncertainty.
- Financial sector reforms (urgent):
- Enhance supervision of distressed banks and conduct an asset quality review to identify viable banks for recapitalization and nonviable banks for resolution.
- Support recapitalization of public banks with measures that improve commercial viability and wind down directed credit schemes.
- Approve new banking bill to give the Central Bank of Iran (CBI) supervisory powers to implement reforms.
- Monetary policy framework:
- Quick passage of the central bank bill to modernize the monetary policy framework and provide greater operational independence to the CBI to pursue low and stable inflation.
- Fiscal policy and public finances:
- Implement a medium‑term fiscal framework to underpin commitment to prudent fiscal policy and ensure gradual fiscal adjustment while funding financial sector reform costs.
- Higher revenue collections, further fuel price adjustment, and better targeting of cash transfers would create space to support growth and equity through higher public investment and cash transfers to the poor.
- Explore scope to use oil revenues to fund bank recapitalization; replenish the Oil Stabilization Fund to provide the budget a buffer.
- Financial integrity and external re-integration:
- Welcome recent steps to strengthen the AML/CFT framework, introduction of IFRS reporting in banks, and audit and securitization of government arrears.
- Urged full implementation of the FATF action plan, further enhancement of AML/CFT framework, and improvement in transparency of corporate ownership to facilitate re‑integration into the global financial system and restore correspondent banking relationships.
- Structural reforms and labor market:
- Reduce the role of the state and improve the business climate to foster foreign investment and aid job creation.
- Implement labor market reforms, including specific measures to facilitate youth and female employment, to make growth more inclusive.
- Exchange rate regime:
- Directors approved retention of the temporary exchange restriction and multiple currency practices, but underscored authorities’ commitment to unify the exchange rate and shift to a managed float by early 2018.
- Data and statistics:
- Urged authorities to improve the quality, timeliness, and availability of data, including by implementing the Enhanced General Data Dissemination System (e‑GDDS).
Selected macroeconomic indicators (highlights from 2014/15–2021/22 table)
- Country and fiscal context:
- Quota: SDR 3,567.10 million
- Population: 78 million, 2014/15
- Per capita GDP: current US$5,288, PPP current US$17,366, 2014/15
- Poverty rate: 9 percent, $5.5 2011 PPP
- Main exports: oil, gas, chemical and petrochemical products, pistachios
- National accounts (nominal and real):
- Nominal GDP at market prices (trillions of Iranian rials):
- 2014/15: 11,036
- 2015/16: 11,096
- 2016/17: 13,045
- 2017/18: 15,146
- 2018/19: 17,379
- 2019/20: 19,884
- 2020/21: 22,624
- 2021/22: 25,639
- Nominal GDP (billions of US$):
- 2014/15: 415
- 2015/16: 374
- 2016/17: 377
- 2017/18: 368
- 2018/19: 386
- 2019/20: 412
- 2020/21: 441
- 2021/22: 472
- Real GDP at factor cost:
- 2014/15: 4.0
- 2015/16: -1.8
- 2016/17: 6.6
- 2017/18: 3.3
- 2018/19: 4.3
- 2019/20: 4.4
- 2020/21: 4.5
- Real oil GDP:
- 2014/15: 7.3
- 2015/16: 6.4
- 2016/17: 52.2
- 2017/18: 2.6
- 2018/19: 6.7
- 2019/20: 5.8
- Real non-oil GDP:
- 2014/15: 3.7
- 2015/16: -2.7
- 2016/17: 0.8
- 2017/18: 3.4
- 2018/19: 3.8
- 2019/20: 4.1
- Inflation:
- CPI inflation (average):
- 2014/15: 15.6
- 2015/16: 11.9
- 2016/17: 8.9
- 2017/18: 11.2
- 2018/19: 11.0
- 2019/20: 10.2
- 2020/21: 9.5
- 2021/22: 9.0
- CPI inflation (end of period):
- 2014/15: 16.2
- 2015/16: 8.3
- 2016/17: 10.5
- 2017/18: 10.7
- 2018/19: 9.8
- 2019/20: 9.2
- 2020/21: 8.8
- Labor market:
- Unemployment rate (percent of labor force):
- 2014/15: 10.6
- 2015/16: 12.5
- 2016/17: 12.3
- 2017/18: 12.2
- Saving and investment (percent of GDP):
- Current account balance:
- 2014/15: 2.4
- 2015/16: 6.3
- 2016/17: 5.3
- Investment:
- 2014/15: 37.7
- 2015/16: 32.1
- 2016/17: 31.2
- 2017/18: 31.1
- 2018/19: 31.4
- 2019/20: 32.9
- 2020/21: 33.7
- Total fixed capital investment:
- 2014/15: 25.5
- 2015/16: 23.5
- 2016/17: 23.1
- 2017/18: 23.3
- 2018/19: 23.9
- 2019/20: 25.0
- 2020/21: 26.0
- 2021/22: 27.2
- Gross national savings:
- 2014/15: 41.5
- 2015/16: 34.5
- 2016/17: 37.5
- 2017/18: 36.4
- 2018/19: 36.7
- 2019/20: 37.2
- 2020/21: 37.1
- Central government operations (percent of GDP):
- Revenue:
- 2014/15: 14.6
- 2015/16: 15.1
- 2016/17: 18.5
- 2017/18: 17.5
- 2018/19: 17.8
- 2019/20: 18.1
- Tax revenue:
- 2014/15: 7.1
- 2015/16: 6.9
- 2016/17: 7.0
- 2017/18: 7.7
- 2018/19: 8.4
- 2019/20: 9.1
- 2020/21: 9.3
- Nontax revenue:
- 2014/15: 8.1
- 2015/16: 8.2
- 2016/17: 11.5
- 2017/18: 9.4
- Of which: oil revenue:
- 2014/15: 5.7
- 2015/16: 6.0
- 2016/17: 5.4
- 2017/18: 8.7
- 2018/19: 6.5
- Monetary sector highlights (annual percent change unless otherwise indicated):
- Credit to the private sector in rials:
- 2014/15: 30.3
- 2015/16: 19.7
- 2016/17: 15.5
- 2017/18: 15.0
- 2018/19: 13.0
- 2019/20: 12.8
- Base money:
- 2014/15: 16.4
- 2015/16: 23.0
- 2016/17: 17.1
- 2017/18: 13.4
- 2018/19: 12.0
- 2019/20: 11.6
- Broad money (M2):
- 2014/15: 22.3
- 2015/16: 30.0
- 2016/17: 29.5
- 2017/18: 16.6
- 2018/19: 13.8
- External sector (billions of US$):
- Exports of goods and services:
- 2014/15: 96.4
- 2015/16: 74.9
- 2016/17: 102.2
- 2017/18: 114.3
- 2018/19: 118.6
- 2019/20: 122.5
- 2020/21: 127.5
- 2021/22: 132.7
- Imports of goods and services:
- 2014/15: -82.1
- 2015/16: -67.2
- 2016/17: -79.4
- 2017/18: -96.0
- 2018/19: -100.6
- 2019/20: -107.6
- 2020/21: -111.6
- 2021/22: -120.1
- Gross official assets/reserves:
- 2014/15: 126.2
- 2015/16: 128.4
- 2016/17: 132.3
- 2017/18: 148.0
- 2018/19: 166.4
- 2019/20: 182.5
- 2020/21: 200.3
- 2021/22: 215.2
- Oil and gas sector:
- Total oil and gas exports:
- 2014/15: 55.4
- 2015/16: 33.6
- 2016/17: 57.4
- 2017/18: 65.3
- 2018/19: 67.7
- 2019/20: 69.8
- 2020/21: 72.2
- Average oil export price (US$ per barrel):
- 2014/15: 79.1
- 2015/16: 45.6
- 2016/17: 48.1
- 2017/18: 55.7
- 2018/19: 56.0
- 2019/20: 56.5
- Crude oil exports (millions of barrels/day):
- 2014/15: 1.4
- 2015/16: 2.8
- Crude oil production (millions of barrels/day):
- 2014/15: 3.2
- 2015/16: 4.2
- 2016/17: 4.8
- Exchange rates:
- Average exchange rate (Iranian rials per US$):
- 2014/15: 26,594
- 2015/16: 29,645
- 2016/17: …
- End-of-period exchange rate (Iranian rials per US$):
- 2014/15: 28,085
- 2015/16: 30,260
IMF Executive Board press release, February 27, 2017.