Baku, Azerbaijan, Feb. 28
By Farhad Daneshvar – Trend:
Foreign direct investment and portfolio equity flows to Iran in 2021 are expected to climb to their highest level over a period of seven years since March 2014.
The International Monetary Fund (IMF) through its latest report has estimated that the total sum would reach $5 billion in March 2017/18.
The IMF report has also suggested that the volume of foreign direct investment (FDI) and portfolio equity flows in the coming years will gradually increase to hit $5.992 billion in 2020/21.
Source: IMF report
The country in March 2015/16 witnessed the lowest level of FDI and portfolio equity flows recording $799 million.
The report has also said that Iran’s external position suggests no significant misalignment or sustainability risk. External debt is low and forecast to remain stable at around 2 percent of GDP.
However, data on the international investment position are not available, reflecting shortcomings in compilation of private sector external assets.
Economic growth in the Islamic Republic rebounded over the course of 2016/17 on the back of higher oil production.
Real GDP grew by 7.4 percent in the first half of 2016/17, rebounding from recession in 2015/16.
However, growth in the non-oil sector averaged 0.9 percent, despite the pick-up registered in the second quarter, reflecting continued difficulties in access to finance and domestic financial sector and structural weaknesses.
Inflation declined to single digits and has hovered in the 9.5 percent range since mid-2016.
The foreign exchange market stabilized although it experienced some volatility towards end-2016 before recovering in January 2017.
The spread between official and market rates has narrowed to about 15 percent.
Growth is projected to stabilize at 4.5 percent over the medium-term as the recovery broadens. Real GDP growth is expected to reach 6.6 percent in 2016/17 and to ease to 3.3 percent in 2017/18 as oil production remains at the OPEC target.
Thereafter, higher FDI and a gradual improvement in domestic financial conditions drive investment and stronger non-oil sector growth.