2012-11-14 23:20:55 - Iran Business Forecast Report Q4 2012 - a new country guide report on companiesandmarkets.com
Despite heightened rhetoric, we do not believe Iran´s threats to close the Strait of Hormuz are credible. Any cut-off in oil export receipts would hit the economy hard, and the government would therefore be very unlikely to carry through with its threats. The economy will remain a regional laggard as investment activity stalls following the imposition of a more stringent set of international sanctions on the regime in 2011 and 2012.
The Iranian rial is likely to remain under fundamental downside pressure as households continue to shift their savings into dollars and gold. The country´s subsidy reform programme is likely to have mixed results over the long term. Although it may have helped to reduce instances of absolute poverty throughout the
country, it has also undermined private consumption among higher income earners.
Major Forecast Changes
We have revised down our budget balance forecasts this quarter and are projecting the the balance to come into deficit to the tune of 6.5% and 7.5% in FY2012/13 and FY2013/14 respectively.
Key Risks To Outlook
Domestic political divisions between supporters of the supreme leader, Ayatollah Ali Khamenei, and President Mahmoud Ahmadinejad will trigger tensions. Higher global energy prices may lead to upside risk to our growth forecasts and downside risk to our fiscal deficit forecasts.
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