Iran has the world's fourth largest proven oil reserves, and the world's second largest proven gas reserves after Russia. Iran is also rich in other resources aside from oil and gas, and has a strong agricultural sector. The country’s Revolutionary Guard and Basij militia are fiercely loyal to the supreme leader, helping to maintain social stability.
We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 18 of Iran’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Iran.
Iran Country Risk
Iran will be one of the fastest growing economies in the region over the next five years as investment comes into the country following the removal of sanctions.
Declining oil prices will force the government to cut current spending and investment in the country's infrastructure sector in 2016, which will result in slow expansion of private consumption and fixed investment.
Downside pressure on the Iranian rial will remain prominent, and the unit will remain sensitive to developments in nuclear negotiations over the coming quarters.
Key Risks To Outlook
A breakdown in the agreement over the country's nuclear programme could prompt us to revise our real GDP growth forecasts sharply downward and our inflation forecasts upward...
Iran Operational Risk Coverage (9)
Iran Operational Risk
Iran Operational Risk
BMI View: The outlook for trade and investment in Iran has received a significant boost from the signing of an agreement with the P5+1 states over the country's nuclear programme in July 2015, which resulted in most sanctions on the country being lifted in January 2016. The international sanctions regime had clouded Iran's trade, investment and growth stories, cutting the country off from major export markets offered by Western states, excluding it from the global financial industry, and effectively precluding foreign investment in key sectors. Consequently, the lifting of sanctions will result in Iran's vast and largely untapped natural resources and consumer market slowly becoming more open to foreign involvement over the medium...
Iran Crime & Security
Iran Crime & Security
BMI View: Businesses considering entering the Iranian market will be faced with a multitude of security threats, and strong and comprehensive precautionary measures are therefore essential, heightening operational costs. Iran's current foreign policy and historically hostile relations with the West have resulted in a number of interstate security risks, and tensions with regional powers Israel and Saudi Arabia are particularly high. Domestic and international terrorism is a major concern, and the rise of Islamic State (IS) on the country's Iraqi border is Tehran's most pertinent security issue. Iran's international isolation has also made it a hub for financial and cybercrime, and facilitated the emergence of organised crime networks. Among the few positives for investors are the moderate rate of violent crime and...
Iran Labour Market
Iran Labour Market
BMI View: Iran's labour market potential will remain largely untapped by businesses over the medium term due to inflexible labour regulations which are unlikely to be reformed. The labour market ostensibly offers considerable appeal to incoming firms, due to a large and well-educated youth population which is eager for employment. Nevertheless, rigid labour laws continue to pose difficulties to hiring and firing practices by protecting older workers in long-term employment and exacerbating the related issues of high youth unemployment and talent flight. Labour costs are...
BMI View: Iran's logistics performance will improve over the medium term as it emerges from the sanctions regime. The lifting of sanctions has provided a boost to utilities provision which will continue be realised in an increasingly reliably supply of fuel and electricity. The transport network is also set to improve over coming years, boosting supply chain connections. Nevertheless, Iran remains a logistics underperformer at present due to the detrimental impact of sanctions on utilities and transport networks, as well as a number of structural issues including...
Iran Trade & Investment
Iran Trade & Investment
There are significant risks to potential investors considering entering Iran with regards to the imposition of international restrictions and sanctions by many countries, particularly in the developed world, hampering both external capacity for trade and investment, but also hindering Iran's access to financial markets and trading mechanisms internationally. Iran has been awarded a score of 28.1 out of 100 for its Trade and Investment Risk. This places it in fourth lowest position regionally out of 18 countries.
This is particularly prevalent in terms of Economic Openness, for which Iran is awarded a score of 21.9. In this section, the main risk is of international sanctions limiting the ease and ability of trading with or investing in Iran. Though Iran possesses around 7% of the world's natural reserves including 10% of the global proven oil reserves and 16% of the world's natural gas reserves, this wealth is difficult to invest in due to...
Iran Industry Coverage (18)
BMI View: The removal of almost all sanctions on Iran's economy heralds a new era for the country. In terms of agriculture, the return of economic growth will have the most rapid and direct impact on consumption. Production and investment in the supply chain will also benefit, but over the longer term. Therefore, production expansion will be slower than consumption growth in the coming years and Iran will remain a large and growing importer of key commodities. The lifting of sanctions will also lead to a normalisation of trade flows, which will encompass a rise in imports and the re-diversification of suppliers.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2005-2020)|
BMI View: The automotive market will rebound significantly in 2016 as sanctions are eased. Returning Western brands, which are preferred by local consumers, will drive passenger vehicle sales and production. Recovering mining and infrastructure industries will boost the commercial vehicle segment.
|Total Vehicle Sales And Production Boosted By Easing Sanctions|
|Total Vehicle Sales And Production|
|f = BMI forecast. Source: National Sources,BMI|
Iran Commercial Banking
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Iran Consumer Electronics
BMI View: We made revisions for the Iran consumer electronics market in our Q415 report to better reflect the growth potential and historical data in the market. Following the nuclear deal in July 2015, we have also revised the potential for future prospects. Under our revised outlook we expect consumer electronics spending growth to accelerate from 2016 as the easing of sanctions makes a positive contribution through increased supply of devices and formalisation of retail, which will drive down prices and catalyse volume growth, enabling vendors to tap into positive fundamentals including population and income growth. We do, however, continue to stress downside risk and uncertainty surrounding the outlook for Iran, including political and operational risk and the challenging economic environment....
Defence & Security
Iran Defence & Security
BMI View: The removal of most sanctions against Iran facilitates a return to economic growth; however, recovery will be slow, and Tehran's military spending will therefore remain modest on a regional comparison in the short- to medium-term. That said, demand for defence equipment will stay strong, as Iran continues to provide assistance to Shi'a groups across the region; seeks to narrow the gap to rival Saudi Arabia's more technologically advanced military; and invests in weapons systems to...
Iran Freight Transport
BMI View: An agreement was reached between Iran and the P5+1 powers in Vienna in July which should see all sanctions against the Middle Eastern country removed in 2016. This is highly positive news for the freight transport sector in Iran, in particular the shipping sector and the country's pipelines, as it will resume oil exports in full. With regards the rest of the freight transport mix, growth will be slow initially as the economy will take some time to recover. Nevertheless, growth will accelerate over the course of our medium-term forecast period to 2020, across all freight modes.
We forecast that total Iranian trade will see a return to real growth in 2016, following four consecutive years of decline from 2012 to 2015, as the effect of sanctions removal takes hold. The removal of almost all sanctions on Iran's economy - which we expect to occur in H116 - will cause a...
Iran Freight Transport
BMI View: The removal of almost all sanctions on Iran's economy is still the biggest news story surrounding the country's freight sector and wider economy, as the subsequent inflow of cash into the country begins to impact on infrastructure projects, as well as acting as a driver for domestic growth and encouragement for foreign investors. The outperformer in terms of y-o-y tonnage growth in 2016 is set to be road freight (2.8%), while there will not be much to separate the air and rail modes (1.2% and 1.5% respectively).
We anticipate that total trade in real terms will grow by 1.5% in 2016 driven by y-o-y export gains of 2.0%, compared to 1.0% import growth.
BMI View: As the majority of international sanctions have been lifted faster than expected and new historic data has been released, we have upwardly revised our construction industry growth forecast for Iran in 2016 from 3.2% to 4.5%. The lifting of sanctions is resulting in the gradual return of private investment as well as improving Iran's access to funding for projects. As such, we expect the country's risk profile - particularly in the financing stage of the project life cycle - to continue to improve.
Latest Updates And Structural Trends
We forecast 4.5% y-o-y real construction industry growth in Iran in 2016 and an average of 6.1% over the next five years as a result of the...
BMI View: We hold a positive outlook for Iran's developing insurance market. Gradual reintroduction into the global economy will boost growth across a range of financial and manufacturing sectors over the course of the forecast period through to 2020, driving demand for various non-life products on both a group and individual basis. While basic lines such as motor and health will continue to dominate, we do expect to see developments in smaller lines such as property, transport and personal accident insurance as the market matures and diversifies. The small life insurance market is also expected to grow, as household income rates rise and demographic trends stimulate demand. The relaxation of sanctions on Iran is likely to entice more foreign insurers to...
Iran Medical Devices
BMI View: Iran will remain an attractive market in the region due to its large size, but it will register low growth in US dollar terms, due to the depreciation of the rial. With a deal over the country's nuclear activity reached in July 2015, the easing of international sanctions should see a rise in imported medical devices into Iran over the coming months. We do not expect a sharp rise, however, as import growth will likely be tempered by lower oil prices and the country's lack of investment over the past decade.
BMI View: The mining sector of the Middle East and North Africa will see strong growth in over the coming years, especially given easing sanctions on Iran. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.
The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for sanctions to be eased from Q116 which will have be a game changer for the country's beleaguered mining industry...
Oil & Gas
Iran Oil & Gas
BMI View: Gas production and consumption will see a substantial ramp-up in 2016 due to new phases of South Pars increasing gas availability. The lifting of sanctions in January 2016 will allow for oil production to increase by around 700,000b/d by year-end. New refining capacity will eradicate net fuels imports from 2017.
The lifting of sanctions will stimulate an immediate export boost for the Iranian petrochemicals industry, which has been operating well under capacity even as it has expanded in recent years. The government has ambitious plans for the sector with the hope that foreign investment will enable it to leverage its massive upstream resources to expand basic chemicals output. However, Iran continues to face infrastructural and regulatory difficulties and a depressed market outlook. Until these are overcome, the industry will struggle to meet the target of more than doubling petrochemicals capacity to 129mn tonnes per annum (tpa) by 2021.
The surge in capacity will not be sustainable if feedstock supply is not forthcoming and markets do not absorb output. Some complexes are suffering feedstock shortages, particularly during winter months. Iranian petrochemical complexes need 30-35mn cubic metres of gas per day. Besides pressure on supply, Iranian...
Pharmaceuticals & Healthcare
Iran Pharmaceuticals & Healthcare
BMI View: The Iranian government is looking to attract greater direct investment by leveraging the growing interest of multinational pharmaceutical companies interested in exploring the high-growth potential of Iran's pharmaceutical market in the post-sanctions period. However, given underlying operating challenges within Iran's pharmaceutical market, the arrival of multinational drugmakers will be a gradual process, rather than an immediate boom.
Headline Expenditure Projections
Pharmaceuticals: IRR69.55trn (USD1.93bn) in 2015 to IRR79.85trn (USD2.00bn) in 2016; +14.8% in local currency terms and +3.3% in US dollar terms. Forecast upgraded...
BMI View: The easing of sanctions, which began in earnest in Q116, is beginning to result in investment in Iran, including in the power sector, and we expect such gains to continue as firms seek to exploit the opportunities created by fresh access to a very large, and long-neglected, market. However, the overall outlook is for moderate, rather than strong, growth due to a poor outlook for government spending and the partial nature of the sanctions removal.
BMI View: The historic deal agreed between Iran and the P5+1 powers in Vienna on July 14 - assuming it passes through parliaments - will see growth return to the Iranian economy and its shipping sector over the coming years. This recovery will not be immediate and there remain significant challenges to growth in the near term. The general trend is that Brent crude will average considerably less than in recent years - we forecast an average of USD59 per barrel in 2015 - meaning that the economic boost from easing sanctions will be limited. Iranian consumers will continue to be under pressure, and a massive ramp up in containerised goods imports is unlikely. However, as real GDP growth in the country picks up, we expect pent-up demand from the growing middle class in the Middle East's largest population to drive growth in imports of containerised...
BMI View: We maintain our view that the removal of sanctions on Iran in January 2016 will have a positive impact on foreign direct investment in the country, with GDP forecast to experience rapid growth over our medium-term forecast period from 2016-2020. In early 2016, we are already seeing South Korean and Italian firms seeking lasting partnerships with Iranian telecommunication companies and we believe this trend will continue into the future. The mobile segment will continue on its strong growth trajectory due to the increased accessibility of 3G and 4G services. The wireline segment will, however, continue to struggle due to growing preference for mobile solutions.
Latest Updates & Industry Developments
Removal of sanctions in January 2016 should encourage increased foreign direct investment into Iran, with BMI...
BMI View: Iran is continuing to extract increasing amounts of water each year. This is largely due to population growth, however, drought concerns and water scarcity make this consumption rate unsustainable, in our opinion. One of the largest consumers of water is the agricultural sector, where very heavily water-dependent crops continue to be grown. The government has recently announced it will be putting limits on this usage and has also changed its stance from very strongly promoting the building of dams to supporting the development of a better wastewater network. The reuse of wastewater, especially in industry and agriculture, could go a long way in aiding the water shortage.
We view the Iranian water sector as one of the least appealing with regards to...