Iran sees economy grow under sanctions

Iran foresees an economic growth of 2.5% in the new year as it absorbs the shock of oil price declines and US-led sanctions.

The Middle East’s second largest economy rebounded from two years of recession in 2014 and logged a growth of 1.45%, according to the International Monetary Fund.

The government has to ride out a wave of further oil price fluctuations and the budget deficit in the new year. It is working on a budget, which takes the burden off the depleting oil revenues and partly shifts the weight to non-oil proceeds.

Oil exports totaled $42.5 billion in the last 10 months, near parity with non-oil sales, according to Government spokesman Mohammad Baqer Nobakht.

The government envisions a similar scenario for the new year as it is treading water because it is not clear yet which direction the nuclear talks between Iran and the P5+1 group of countries will take.

If the negotiations lead to a final solution, Iran will see a notable rise in foreign investment.

Government says it has braced itself for the worst scenario where the country would retain its modest economic uptick even if the negotiations collapse.

Inflation has dropped to around 16% from 40% under the former President Mahmoud Ahmadinejad in what his successor Hassan Rouhani has described a miracle.

Iran’s economy contracted between 2012 and 2013 at a rate of 6.8% and 1.9% which saw the national currency lose two-thirds of its value.

But the country is functioning on the strength of a large economy with its massive small-size businesses. This factor has played out well to Iran’s advantage and kept its economy from collapse even under a plethora of sanctions.

According to the IMF, Iran generated a GDP of $406 billion in 2014 which landed it second on the top of 30 economies in the Middle East, North Africa and the Central Asia.

US-led sanctions are still in place but Iran’s economy chugs along. Many experts say the idea that the economy could ever run out of steam under intensive penalties is absolutely misplaced.