World Business and Economic Analysis
World Business and Economic Analysis
A view of northern Tehran with the snow-capped Alborz mountains in the background. (File photo).
International credit rating agency Capital Intelligence has revised its outlook on Iran’s sovereign ratings to “stable” from “positive”.
A credit rating is an assessment of a business or government’s ability to pay its financial obligations.
In its latest evaluation, the Cyprus-based agency upgraded Iran’s long-term foreign and local currency ratings to ‘B+’ from ‘B’. For the short term, it affirmed the ratings at ‘B’.
“The upgrade reflects the progressive improvement in the external environment of the Islamic Republic of Iran and its positive impact on the sovereign creditworthiness,” Capital Intelligence said.
It cited US and Iran’s recent endorsement of a nuclear accord reached in July, calling it “positive events” that pave the way for the removal of sanctions.
The agreement also paves the way for the release of frozen financial assets, the restoration of Iran’s access to cross-border funding, and a significant improvement in trade and investment, the agency said.
Consequently, full implementation of the Joint Comprehensive Plan of Action (JCPOA), as the nuclear accord is called, is expected to improve Iran’s medium-term economic growth prospects and reduce sovereign risk, it added.
Tabiat Bridge, the largest pedestrian overpass in Tehran
Capital Intelligence issued the improved ratings with a caveat of risk to its assessment given “the uncertainty surrounding the timeline for implementation” of the JCPOA.
According to the agency, the short- to medium-term growth prospects for the Iranian economy have improved since the last review.
It saw Iran’s real GDP increasing by about 4% in 2016 after a 0.8% growth in 2015 and expanding by at least 4% in the medium-term if sanctions are lifted.
Inflation is expected to decline to 11.5% in 2016 after falling to around 15% in 2015 from above 40% at the start of President Hassan Rouhani’s office in 2013.
The agency factored in Iran’s low public debt and its “sizable” official foreign assets but also touched on the government budget deficits of “increasing magnitude” in 2014 and 2015, reaching about 2.9% of GDP, after a decade of surpluses.
Assuming a reversal of sanctions in the short- to medium-term, the agency expects the budget deficit to decline to an average of 1% of GDP during 2016-2017, it said.
The government intends to strengthen the budget structure and reduce the budget deficit by revising non-oil taxes, improving tax administration and pressing ahead with planned cuts in fuel and food subsidies.
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Iran’s President Hassan Rouhani
Iran’s President Hassan Rouhani will pay an official visit to Italy, Vatican and France and deliver a speech at the Leaders’ Forum of the United Nations Educational, Scientific and Cultural Organization (UNESCO) in Paris.
Rouhani will set off for Rome this Saturday at the head of a high-ranking delegation to hold talks with senior Italian officials, Iranian Presidential Office’s Deputy for Communications and Publicity Affairs Parviz Esmaeili said on Monday.
He added that the Iranian president is scheduled to hold meetings with Italy’s President Sergio Mattarella and Prime Minister Matteo Renzi.
Rouhani will also hold a meeting with Italian investors and leading industrialists in Rome, Esmaeili noted.
He said the Iranian president will then head for Vatican to meet Pope Francis and Prime Minister Archbishop Pietro Parolin.
He added that Rouhani will also address UNESCO Leaders’ Forum as a special guest at the organization’s headquarters in Paris, France, on November 16.
Esmaeili said the Iranian president plans to sit down with his French counterpart François Hollande in Paris on November 17.
He noted that during Rouhani’s four-day visit, Iranian officials accompanying the president will sign some memoranda of understanding for the expansion of relations in different fields.
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‘To develop bilateral cooperation in drilling and exploration industries, we have signed a Memorandum of Understanding (MoU) with Italian energy group Eni,’ said Mohammad Reza Taaykadi, the Deputy Head of National Iranian Drilling Company (NIDC) on Sunday.
The official also recounted that there has been extensive talks between Iran and Iraq to run joint projects of drilling and exploring oil and gas in north and south areas of Iraq while current security concerns are impeding the progress.
He voiced hope that the continuous negotiations would lead to finalizing contracts with Iraq, in coming future months.
Also some Turkish companies are seeking NIDC’s expertise and are planning to borrow rigs from and hand out projects to Iranians, added the oil official.
Taaykadi recounted that Technology Transfer Contracts (TTC) are another realm of Iran-Iraq oil cooperation.
Boasting Iran’s tantalizing oil market, he affirmed that Italian energy company Eni and Saipem S.p.A., the Italian oil and gas industry contractor which is a subsidiary of Eni, are negotiating with Iranians and, have signed MoUs so far.
A reputed German company is also in talks to provide us with services of drilling, capital absorbing, and exchange of technology, Taaykadi asserted.
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