Gross domestic product growth soared to 12.5 percent in the year through last March 20, but that was almost entirely due to a leap in oil exports, after sanctions were removed under a deal with world powers on Tehran’s nuclear program, Reuters reported.
Oil exports are no longer growing nearly as fast. But the economic recovery is now beginning to extend to non-oil areas, said Catriona Purfield, the head of an IMF team which held annual consultations with the Iranian government this month.
“Growth has begun to broaden to the non-oil sector,” Purfield said in a statement, predicting GDP would expand 4.2 percent in the current fiscal year and that growth could rise toward 4.5 percent in subsequent years with financial reforms.
Official statistics in Iran are often incomplete and released only slowly, and the policy-making process can be opaque, so Iran’s consultations with the IMF provide one of the clearest glimpses into its economy.
“An asset quality review, related-party lending assessment, and a time-bound action plan to recapitalize banks and address non-performing loans should start immediately,” Purfield said, adding that the cost of recapitalizing banks could be covered with long-term government bond issues.
Iranian banks were weakened during the sanctions years by a sluggish economy, government interference in lending decisions, lax regulation and excessive competition with unlicensed financial institutions.
Authorities are now discussing how to deal with tens of billions of dollars of bad debt.
Central Bank of Iran has been intervening in the foreign exchange market to support the rial currency in the face of the international uncertainty.
But the IMF urged the CBI to let exchange rates move more freely and to abolish a dual system of official and market rates, saying this would prevent Iran’s foreign reserves from running down and make the economy more competitive.
Campaigning for a second term in office earlier this year, Iranian President Hassan Rouhani said easing international sanctions and addressing a high rate of inflation were national priorities. As easing sanctions make it somewhat easier to do business in Iran, Rouhani boasted after the elections that banking channels to the world could be opening up.
Inflation, nevertheless, was a drag on momentum for Iran at 9.9 percent. Purfield said while growth is apparent, it will be tested by near-team challenges in the way of "external uncertainty."
For OPEC, Iran produced about 3.8 million barrels per day last month, a slight decline from the previous month. Total Iranian oil production last year was around 3.79 million barrels per day.