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Iran’s GDP growth can reach 6.6% in current fiscal year: IMF

Business Materials 20 December 2016 18:00 (UTC +04:00)

Baku, Azerbaijan, Dec. 20

By Emil Ilgar – Trend:

Higher oil production and exports, after implementation of the Joint Comprehensive Plan of Action (nuclear agreement) should allow real GDP growth of Iran to rebound to 6.6 percent in 2016/17, the International Monetary Fund (IMF) said on its official website.

Iran’s fiscal year started on March 21.

“Growth is projected to ease to 3.5 percent in 2017/18 as oil production normalizes and non-oil sector growth remains modest. The prudent policies implemented in recent years should allow inflation to average about 9 percent in 2016/17 before temporarily rising to just over 11 percent in 2017/18 due to the pass-through from recent exchange rate depreciation,” the report added.

A mission from IMF, led by Catriona Purfield, visited Tehran, Iran from December 3 to December 14, 2016 to conduct discussions.

“The challenge now is to create the conditions for sustained macroeconomic stability and growth. Comprehensive and coordinated reforms that seek to defend low and stable inflation, restructure and recapitalize banks, cast fiscal policy in a medium-term framework to support reforms, and prioritize legal and regulatory changes that facilitate investment, aid job creation, and improve governance would achieve these goals. Better data quality, availability, and timeliness would support the reform process,” Purfield said.

She added that Iranian government should sharply reduce its directed credit schemes and adjust regulated prices to curb liquidity pressures.

“The Central Bank requires greater independence and better tools under the new Central Bank Bill to sustain low and stable inflation. The mission welcomes the authorities’ commitment to unify the exchange rate and return to a managed float, and recommends this proceeds expeditiously to ensure flexibility to manage shocks.”

According to Purfield, banks are in urgent need of restructuring and recapitalization to safeguard financial stability and reduce high lending rates.

“The Sixth Development Plan recognizes the need to create jobs. The education system needs to better match the skills of graduates to employer needs. Higher female participation and employment can boost growth. Women represent over half of university students and the government can further enhance their job opportunities through a non-discrimination law and targeted active labor market policies,” the report said.

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