Iran: Macroeconomic Country Outlook
- GlobalData forecasts the country’s economic growth to expand by 2% in 2022
- Iran was ranked 116th out of 152 nations in the GlobalData Country Risk Index (GCRI) Q2 2022
- According to GlobalData, the services sector grew by 36.4% in 2021
In June 2022, according to the Secretary of the Supreme Council of Free and Special Economic Zones Saeed Mohammad, the Central Bank of Iran (CBI) approved the establishment of offshore banks in free trade and industrial zones. The Iranian offshore banks will offer bonds, foreign currency guarantees and be able to trade foreign currencies and possibly arrange loans based on goods value held within the zone. Being sited in a Free Trade Zone, the VAT (Value added tax) would get zero (unless the goods subsequently enter mainland Iran) and the CIT (Corporate income tax) would be reduced to either zero or a minimal base for a set number of years (from 3 to 10 years), which would allow the country access to much needed foreign currency.
Key findings
- Iran’s stance on Russia’s invasion of Ukraine: The President of Iran, Ebrahim Raisi expressed concern of Russia’s security since NATO expansion as a serious threat to security and stability of independent nations. In July 2022, according to the US officials, Iran planned to supply drones and provide technological co-operation to Russia. Iran’s support for Russia reflects the extension of bilateral ties between the nations. However, the foreign ministry of Iran indicated the nation’s preference for a peaceful resolution through negotiations.
- Economy on recovery path: In December 2021, the National Development Fund of Iran announced to deposit IRR120 trillion ($2.9 billion) into the fund to support the Iran’s Capital Market. According to the World Bank, the economy of the country started gradual recovery since mid-2020 boosted by the oil and service sector. According to GlobalData, the economy of Iran expanded by 2.4% in 2021. GlobalData forecasts the economy to grow by 2% in 2022, due to increased revenue from oil exports and waning of the pandemic impact.
- Iran ranked 127th out of 190 countries in the World Bank’s Doing Business Report in 2020: Iran’s ranking in the World Bank’s Ease of Doing Business Report (2020), improved by one place over 2019 to 127th in 2020 (out of 190 countries). It takes 72 days to start a business in Iran as compared to the Middle East and North Africa average of 19.7 days and the OECD high income average of 9.2 days. In terms of dealing with construction permits, it takes 130 days as compared to the Middle East and North Africa average of 123.6 days and the OECD high income average of 152.3 days.
- Growing ties with China: In April 2022, Iranian President Ebrahim Raisi expressed government’s desire for closer cooperation with China through the expansion of military cooperation since Iran and China have increased military ties in recent years, with their visit to each other’s port. In July 2022, both the nations raised their bilateral relations to strategic level and signed a deal under which Beijing will invest more than $400 billion in Iran in the next 25 years. The 25-year strategic agreement would boost economic activities, oil and mining to promoting industrial activity in Iran, transportation and agricultural collaborations.
- Digital transformation: In April 2022, the Central Bank of Iran announced rules for issuance of digital coins in the country. The country intends for digital rial to make foreign trade easier, solve inconsistencies in its local payments system, and decentralize resources to reduce corruption. In May 2022, the country received an order from court to proceed action on illegal digital transactions. Therefore, the Iranian Ministry of Intelligence coordinated the operation with the Central Bank of Iran (CBI) and blocked 9,219 bank accounts of 545 individuals suspected of carrying out illegal foreign currency and digital currency transactions. In July 2022, Iran signed a memorandum of understanding (MoU) with Mali to expand technical and vocational cooperation through the development of educational, research, and technology.
- Step toward renewable energy in the country: In December 2021, the Iranian government’s Renewable Energy and Energy Efficiency Organization announced the inauguration of a 150MW silicon cell production line in the city of Khomeini. In January 2022, the Iranian Energy Ministry announced a plan to add another 10GW of renewable energy capacity over the next four years. Further, the ministry signed a MoU with the Renewable Energy and Energy Efficiency Organization (SATBA) and private investors to implement the plan through allocation of IRR30 trillion ($714.2 million). In March 2022, the Energy Ministry announced a goal of 550,000 solar rooftop installations in the country by 2025. In May 2022, the SATBA launched new tender for developing 4GW of solar photovoltaic (PV) capacity in the country to boost its renewable energy capacity.
Key fundamentals
Sectoral outlook
- Steps to boost travel and tourism industry: In January 2022, Iranian authorities anticipated nearly 31 tourism-related projects worth IRR209 billion ($5 million) across the province during the first nine months of the current Iranian calendar year (March 21–December 21, 2021). In February 2022, the authorities announced to inaugurate a total of 24 tourism-related projects worth IRR4.9 trillion ($116.7 million) in the northern province of Golestan, Iran. In February 2022, the President of Iran introduced tourism-related projects with an investment of IRR14 trillion ($333.3 million). The project is expected to create more than 750 job opportunities. According to the 2025 Tourism Vision Plan, the country seeks to increase the number of tourist arrivals from 4.8 million in 2014 to 20 million in 2025. In June 2022, Iran signed an agreement with Iraq to enhance tourist visits between the two neighboring countries. According to the World Economic Forum, World Travel and Tourism Council (2021), travel and tourism contributed 4.1% to GDP and the sector created 1.3 million jobs, which is equivalent to 5.1% of total jobs.
- Positive outlook for auto industry production: According to the Iranian Ministry of Industry, Mine and Trade, auto production of the country is projected to grow by at least 50% during the current Iranian fiscal year (March 21, 2022, to March 2023). In March 2022, the President of the country issued eight presidential executive orders in the fields of production to expand the production of new advanced vehicles and electric vehicles. Moreover, the government also focused on investment for the entry of knowledge and technology from the defense and space industries and the capacity of knowledge-based companies to transform the auto industry of Iran. Additionally, in March 2022, Iran`s President Ebrahim Raisi issued orders to provide the required parts and immediate clearance as well as supply of cars in the warehouses of car companies to the market to boost the industry. According to the International Organization of Motor Vehicle Manufacturers (OICA), Iranian automakers produced 894,298 vehicles, which was higher than many industrialized countriesy, namely Italy (795,000), South Africa (499,000), Poland (439,000), Portugal (289,000), Taiwan (265,000), Belgium (261,000), Austria (136,000), Finland (93,000) and Egypt (23,000) in 2021.
- Iran’s oil and gas sector to rebound sharply: In June 2022, the National Iranian Oil Refining and Distribution Company (NIORDC) signed a MoU for the construction of 948km oil pipeline with an investment of approximately $425.1 million, which will have the capacity to transfer 150,000 barrels per day of petroleum products. Moreover, the project will also involve the construction of three terminals and two pump stations. According to GlobalData, the Middle East region is expected to witness 598 oil and gas projects commence operations during the period 2022–26, where Iran dominates the upcoming project’s landscape accounting for 45% of the total projects in the region, expected to start operations during the 2022 to 2026 period. In June 2022, Iran signed a contract with Oman to develop two gas pipelines and an oil field along their maritime border.
GlobalData Country Risk Index (GCRI) – Q2 2022
Iran was ranked 116th out of 152 nations in the GCRI Q2 2022. The country’s risk score is in the high-risk nations band (50–60). Iran’s risk score across major PESTLE parameters as well as the overall risk score (55.1), was higher than the world average (44) and the Middle East and North Africa (36.3) in Q2 2022. The country secured the highest risk on political environment (79.9) and legal environment (79.2). Depreciation of rial, high inflation and rising tensions with the US are the major risk factors for the Iranian economy.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Middle Eastern and North African nations in this publication include Iran, Egypt, Morocco, Saudi Arabia, Israel, and the UAE.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: Iran
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