Iran will struggle to create a ‘resistance economy’

Subject

The Iranian budget.

Significance

Speeches marking the Iranian New Year (Nowruz) on March 21 highlighted disagreements between Supreme Leader Ali Khamenei and President Hassan Rouhani. While both promoted a ‘resistance economy’, each meant something different. The recently published budget for the 2017-18 fiscal year highlights divisions and linkages between the two philosophies.

Impacts

• Real GDP growth in 2017 will not be much above 3.0% and will rise to 4.5% in the medium term.
• Rising tensions with Washington will further boost defence spending, crowding out development.
• Additional US congressional sanctions, or even threat of sanctions, are likely to depress investor confidence.
• New transport links to Central Asia may significantly increase trade.