“Iran’s election results vindicate President Rouhani’s reforms and signal predictability in economic policy,” Mohammad Nahavandian, the head of the Iranian presidential office and chief of staff, announced to guests at the Financial Times’ Iran summit in London. The statement came shortly after Iran’s legislative elections on February 26, which saw a substantial victory for candidates considered to be moderate or reformist.
In the months following the lifting of economic sanctions over Iran’s nuclear programme, foreign investors have been visiting Iran in droves to seek lucrative opportunities in the country of 79 million whose $400bn economy is the second largest in the Middle East, after Saudi Arabia. The Islamic Republic’s president, Hassan Rouhani, is trying to diversify the economy away from oil. Other key sectors that can power the economy include natural gas, minerals, manufacturing and services.
The World Bank predicts Iran’s GDP will grow by 6% in 2016 and nearly 7% in 2017. Nonetheless, the country needs to undertake extensive economic reforms to meet the needs of the international economy, officials and investors at the FT summit agreed. Speakers noted that Iran must reform its financial sector, state-supported industries and productivity.
Productivity was still low in the decade before sanctions; the economy “suffered immensely” under government control, said Aasim Husain, deputy director for the Middle East and central Asia department at the IMF. “Iran has huge potential but macroeconomic reforms are needed – low inflation, stable unified exchange rates, and a fiscal policy less dependent on oil prices,” he added.