RenCap: Iran GDP may grow 4.5% by end of 2017 but stock market needs sorting out

Russian investment bank Renaissance Capital estimates that the GDP of post-sanctions Iran may grow 4.5% by the end of 2017 if the oil price stays at around $30 per barrel.

But RenCap will stick to its earlier forecast that Iran’s GDP will increase 6% in these two years if the oil price rebounds to $50 in 2016, the Moscow-headquartered bank’s global chief economist, Charles Robertson, says in a report.

He argues that oil is more likely to go up and stabilise between $45 and $50 in 2016 than stay at around $30.

If it does stay at about $30, Iran will raise $26bn in oil revenues this year. This means there will altogether be $37bn of new inflows to Iran if trade finance debt and portfolio inflows meet RenCap forecasts, Robertson says.

On top of this, Iran’s central bank expects $32.6bn of money frozen abroad during the sanctions period to be repatriated.

Iran’s stock market has plummeted 30% in terms of Iranian rials since January 2014 because of the weakening economy, tight liquidity, high interest rates and comparatively low corporate earnings, Robertson says.

The Islamic Republic has a lot of work to do to attract foreign investors. Robertson makes a long list of conditions the country will have to meet to attract foreign money, including a merging of official and parallel exchange rates, the introduction of English-language accounts, an easing of price controls, and moves to abolish subsidies.

Yet “a recent visit to Iran left us impressed”, he says. “Sectors such as retail, consumer goods, technology, mobile payments, social media and online classifieds are mainly private equity stories for now, but we would expect some IPOs over time.”

Much importance is attached to the planned February 26 elections – Iran will elect its next parliament and Assembly of Experts, the deliberative body appointing and removing the country’s supreme leader.

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