The International Monetary Fund said that the nuclear agreement between Iran and the world powers allows for a significant improvement in Iran’s economic outlook.
The International Monetary Fund said that the nuclear agreement between Iran and the world powers allows for a significant improvement in Iran’s economic outlook.
In its October report on regional economic outlook for Middle East and Central Asia, the IMF said that the recent agreement allows for the removal of most economic sanctions.
The interim agreement reached with the P5+1 in November 2013, along with prudent domestic macroeconomic policies, provided considerable impetus to several sectors, most notably oil, transportation, and manufacturing.
Real GDP grew by 3 percent in 2014/15 and 12-month inflation declined markedly, stabilizing at about 15 percent, Tehran Times reported.
However, economic spillovers to the rest of the world are uncertain but are likely to be a net positive, for two reasons. Iran’s return to the global oil market is expected to increase global supply of oil, and the removal of sanctions is likely to open new trade and investment opportunities.
Iran and the 5+1 group - the United States, Britain, France, China and Russia plus Germany - finalized the text of the Joint Comprehensive Plan of Action (JCPOA) in Vienna on July 14.
Once approved and implemented, the JCPOA is expected to provide relief from sanctions in four broad areas: export and transportation of hydrocarbon and hydrocarbon-related products; banking and other financial services and transactions, including restored access to the international payment system (SWIFT); access to foreign financial assets; and the sale, supply of parts, and transfer of goods and services to the automotive and air-transportation sectors, and associated foreign investment.
The sanctions relief will bring three key benefits for Iran. First and foremost will be a positive external demand shock, both for oil and non-oil exports. In addition, the decline in the cost of external trade and financial transactions will act as a positive terms-of-trade shock (lowering the price of imports and raising the price of exports).
