21 October 2017
Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, today announced that it has affirmed Iran’s Long-Term Foreign and Local Currency Sovereign Ratings at ‘BB-’ and its Short-Term Foreign and Local Currency Sovereign Ratings at ‘B’. At the same time, the Outlook for Iran’s ratings has been affirmed at ‘Stable’.
The ratings reflect the relatively favourable short to medium-term economic and fiscal outlook following the lifting of international economic and financial sanctions relating to the country’s nuclear programme. As a result, Iran has begun to gradually repatriate previously frozen external financial assets and export more hydrocarbons to a wider range of markets, thereby improving the country’s medium-term economic growth prospects and increasing the central government’s oil revenues.
The Iranian economy is expected to continue its recovery in FYE 2018, underpinned by the growth of the hydrocarbon sector, a small rebound in other key sectors that receive financial support from the government (such as the petrochemical and construction sectors), and a pickup in domestic demand.
Despite the recent volatility in the exchange rate associated with the uncertainty surrounding the US’ commitment to the nuclear deal, the gap between the official exchange rate and the market rate has fallen further to around 17% as of June 2017, compared to a record high of 114% two years ago. Inflation has also declined, standing at 10% in FYE 2017, compared to a record high of 34.7% in FYE 2013, and is expected to stabilize at around 9% in FYE 2019-20.
On the fiscal front, the public finances are expected to remain satisfactory. The structure of the budget is expected to continue improving due to policy reforms and efforts to broaden the tax base. The primary central government budget position is expected to return to surplus in FYE 2019, conditional on the implementation of planned fiscal consolidation measures and premised upon an increase in OPEC oil prices to an average of USD60 per barrel.