Since the partial relief of sanctions in early 2016, Iran has increased its oil production by almost 20% (up to 3.8-3.9 mb/d) and has been exempt from OPEC supply cuts. Inflation dropped below 10% for the first time since 1990 (down from +30.8% in 2012) as import costs eased after the sanctions lifting. External trade has also regained momentum (e.g. additional +EUR536mn or +26% in imports from Germany in 2016).
Robust GDP growth (+4% in 2016 and +3.8% in 2017) should limit commercial risk. With regard to financing risk, public and external and debt ratios are projected to stay low. FX reserves are ample at around USD70bn, providing a healthy import cover of over 10 months.
Annual current account surpluses have been posted since 2005 and are forecast to widen to more than 3% of GDP in 2016-2018. However, the fiscal deficit worsened to an estimated -3.5% of GDP in 2016, due to low oil prices, and is forecast to remain around that level in the next two years. Despite the lifting of sanctions on transactions with Iranian banks, there is still hardly any external financing available as western banks remain reluctant to doing business with Iran, being wary of infringing remaining U.S. sanctions. This tilts the balance of risks to the downside.