World Banks sees strong Iran growth

OREANDA-NEWS. January 11, 2016. Accelerating growth in Iran after US and EU sanctions are lifted — perhaps as soon as this quarter — will be the main motor of GDP growth in the Middle East and north Africa region in 2016, said the World Bank in its twice-yearly Global Economic Prospects report.

Even assuming an average oil price in 2016 of \\$49/bl, the Washington-based institution has raised its real growth forecast for Iran, compared with its June 2015 report, by 3.8 percentage points for 2016 to 5.8pc, and by 4.7 percentage points to 6.7pc. By contrast, the forecast growth rates for Saudi Arabia have been cut, by 1.7 percentage points for this year, to 2.4pc, and by 1.4 percentage points for 2017, to 2.9pc.

The World Bank expects crude production in Iran "to increase rapidly following the removal or suspension of sanctions, by an estimated 500,000-700,000 b/d in 2016". Capital inflows post-sanctions could expand gas development.

But the bank also noted that rising Iranian oil production could help to suppress prices, aiding regional importers but adding further burdens on oil exporters.

The World Bank repeats the IMF's calculation of last year that oil prices are below the fiscal breakeven level for every oil producer in the region. Oil exporters' fiscal deficits will narrow in 2016, following belt-tightening, but will not stabilise government debt.

The report also noted that all oil exporters in the region had current account surpluses in 2013, all except Iran, which had fallen into deficit by 2015.