UK economic consultant upbeat about Iran post-sanctions

London

IRAN'S economy is projected for steady growth after the lifting of international sanctions, despite the oil price slump and international worries about the regime's poor human rights record and its foreign policy in the Middle East, UK economic consultant CEBR (Centre for Economics and Business Research) said.

Following a visit to Iran, CEBR economist Danae Kyriakopoulou contends that after two years of deep recession in 2012 and 2013, and a slight improvement in 2014, Iran's growth will "gradually stabilise around the 2.5 per cent mark" between 2016 and 2020.

"The lifting of economic sanctions that have been in place since 2006 should help Iran move away from being a 'pariah' of the global economy and become more integrated through trade and investment."

She predicts that "the combination of demographic and sociological factors" in a population of around 79 million people will help boost the economy.

Unfortunately for the nation, several "hurdles", notably local and international business restrictions, poor corporate governance, hardline fundamentalist regime control of sizeable stakes in the economy, backward infrastructure, military actions and support of terrorist groups in the Middle East are impeding growth, analysts say.

For example, Nina Skero, another CEBR economist who recently visited Bahrain, doubts whether Iran's immediate neighbours will engage in trade.

"For nations such as Bahrain or the UAE (United Arab Emirates), the economic cost of alienating themselves from Saudi Arabia - a country whose relations with Iran have traditionally been strained - may simply outweigh the economic benefit of engaging with Iran," Ms Skero warns.

Despite these hurdles and the rigidity of the fundamentalist regime, Ms Kyriakopoulou is confident that the Iran economy will prevail. "It is a very young nation with literacy rates of the youth miles apart from older generations. Young Persians also have an enthusiasm to engage with foreigners and practise their English - they are very eager for the sanctions to be lifted."

Another "encouraging sign" is the trend of "re-migration" among expatriates, Ms Kyriakopoulou adds. Second and sometimes third-generation Persians who typically grew up in London, Paris, or the US after their families left the country following the (1970s) revolution, are now starting to return to the homeland to set up their own businesses or take over the family businesses, she says.

Given the strict religious regime, Ms Kyriakopoulou was surprised to find wide-scale advertising in the underground transport system, including posters on walls of lifts, carriages and platforms. The advertising illustrates the natural dynamism of the people, and the process of modernisation also includes the wide use of digital technology, social networks, beauty ideals, and even gender roles to the most remote parts of the country, says Ms Kyriakopoulou. "There is a general enthusiasm around the country about the prospect of sanctions being lifted, especially among the young people. But the tourism industry has taken a big hit from many years of economic isolation and it will take a long time for it to recover."

Martin Cerisola, assistant director of the International Monetary Fund's Middle East and Central Asia Department, says: "The agreement on Iran's nuclear programme and the envisaged lifting of economic sanctions bring a unique opportunity to build on and broaden the achievements of the past two years."

But he adds that Iran's economy is "weak" and warns that "officials needed to make structural changes if they want to reap the full benefits of the nuclear deal".