TEHRAN – Iran has achieved considerable progress in raising per capita income and living standards in previous decades, the International Monetary Fund (IMF) said in a press release which was published on April 3.
On March 28, the Executive Board of the IMF concluded the Article IV consultation1 with the Islamic Republic of Iran.
According to the IMF, gross foreign assets of the Central Bank of Iran (CBI) rose to about $105 billion by end-2012/13.
Since the Presidential election in mid-2013, there have been some signs of stability. The exchange rate has appreciated markedly in the bureau/parallel market. The CBI has kept a lid on base money growth thanks to tighter credit to the banking system and some fiscal consolidation, and 12-month inflation has declined to about 29 percent in January 2014.
With some positive tailwinds from the external side and some incipient signs that the pace of contraction in domestic demand is slowing, it is projected that economic activity would begin to stabilize in 2014/15, with real GDP projected to increase by 1–2 percent.
In the meantime, the authorities are taking steps to make the regulatory framework for foreign investment in the oil sector more attractive, while upside risks emanate from the interim agreement with the P5+1.
However, macroeconomic performance worsened markedly following the subsidy reform in late 2010 and the intensification of sanctions in 2012. The economy contracted by almost 6 percent in 2012/13 and 12-month inflation rose from about 12 percent in late 2010 to around 45 percent in July 2013.
With about 10 percentage points of GDP decline in total revenues since 2010/11, the authorities cut spending and the overall budget balance shifted from a surplus of 3 percent of GDP in 2010/11 to an estimated deficit of 1 percent of GDP in 2013/14.
Throughout these shocks, monetary conditions were relatively accommodative, as domestic interest rates became increasingly negative in real terms.
Looking ahead, the near-term outlook remains highly uncertain. Facing continued constrained prospects for oil revenues and international financial transactions, the economy is envisaged to remain stagnant in 2013/14, with real GDP estimated to decline by 1