Iran economy could rebound to 4.4% growth if US sanctions lifted: IIF

Iran economy could rebound to 4.4% growth if US sanctions lifted: IIF
Iran’s rial currency has lost about 50% of its value against the US dollar in 2020. (File/AFP)
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Updated 26 November 2020

Iran economy could rebound to 4.4% growth if US sanctions lifted: IIF

Iran economy could rebound to 4.4% growth if US sanctions lifted: IIF
  • Biden’s victory in the Nov. 3 US election has raised chances that the United States could rejoin a deal Iran reached with world powers in 2015
  • Trump abandoned the nuclear deal in 2018, and Tehran responded by scaling down its compliance

DUBAI: Iran’s economy could grow 4.4% next year if US President-elect Joe Biden lifts sanctions that have contributed to a deep three-year recession, although the COVID-19 crisis could limit foreign investment, the Institute of International Finance (IIF) said.
Biden’s victory in the Nov. 3 US election has raised chances that the United States could rejoin a deal Iran reached with world powers in 2015, under which sanctions were lifted in return for curbs on Iran’s nuclear program.
This is unlikely to happen overnight, however, and the prospects remain uncertain as the adversaries would both want additional commitments.
Iran’s rial currency has lost about 50% of its value against the US dollar in 2020, reflecting economic damage from sanctions and the coronavirus pandemic, although it strengthened in late October in anticipation Biden would unseat US President Donald Trump.
Iran has the highest COVID-19 death toll in the Middle East.
Trump abandoned the nuclear deal in 2018, and Tehran responded by scaling down its compliance.
The IIF, a trade body for the global financial industry, said that if United States lifted most of the economic sanctions on Iran by the end of 2021, the economy could expand 4.4% next year after an expected 6.1% contraction in 2020.
It would then grow by 6.9% in 2022 and 6% in 2023, the IIF said, adding that if oil exports increase, Iran could see its foreign reserves rise to $109.4 billion by the end of 2023.
Tehran has spoken optimistically about the return of foreign companies under a new US administration, but lack of financial transparency could still curb interest from firms who had made tentative moves to invest after the 2015 deal was struck.
Garbis Iradian, IIF’s chief economist for the MENA region, told Reuters foreign direct investment inflows would increase progressively from this year’s $890 million to over $6.4 billion in 2025.
Assuming most sanctions could be lifted by late next year, FDI is likely to remain below $2 billion in 2021, with most of the money coming from China, Iradian said, adding: “Moreover, the coronavirus pandemic will limit FDI inflows in 2021.”
The Iranian economy would remain fragile, though “not to the brink of collapse” if most of the sanctions remain in place, the IIF said.
Under such a “pessimistic” scenario, Iran would post 1.8% growth next year and its foreign reserves would steadily decrease from about $80 billion this year to $46.9 billion by the end of 2023.
About 90% of Iran’s official reserves are frozen abroad due to US sanctions.


Norwegian Air gets govt backing for survival plan

Norwegian Air gets govt backing for survival plan
Updated 47 min ago

Norwegian Air gets govt backing for survival plan

Norwegian Air gets govt backing for survival plan
  • Low-cost carrier to end long-haul operations and instead focus on European cities

OSLO, Norway:  The Norwegian state said on Thursday it was ready to offer aid to Norwegian Air, after the ailing low-cost airline presented a new plan to survive its COVID-induced crisis.

Hit hard by the COVID-19 pandemic’s impact on travel, having already been in financial trouble before, Norwegian applied for bankruptcy protection in both Ireland and Norway in December to buy time to work out a solution with its creditors.

The low-cost airline presented a series of proposals on Jan. 14, including an end to its long-haul flights in favor of a refocusing on Europe, and a massive debt reduction target coupled with raising new capital.

The government was asked to support the plan and has now signaled its willingness, on condition that private investors “do their part.”

“The plan seems more robust than the one we said no to in October. That’s why we are ready to contribute,” Trade Minister Iselin Nybo said in a statement.

Norwegian’s shares jumped by nearly 16 percent on the Oslo Stock Exchange, although they are still down by more than 98 percent year-on-year.

BACKGROUND

Norwegian, Europe’s third largest low-cost airline until the pandemic paralyzed global air transport last year, has seen its debt and losses pile up since 2017.

The state, which extended 3 billion kroner ($356 million, €292 million) in public guarantees to Norwegian last year before turning off the tap, could offer aid in the form of a “hybrid” loan that can be converted into shares later.

But the government made clear it had no intention of becoming an owner.

“Norwegian needs, among other things, to bring in long-term strategic shareholders. The state has no ambition to become a shareholder,” Nybo said.

Oslo said its condition would be that Norwegian manage to raise 4.5 billion Norwegian kroner (€440 million) in new capital “mainly” from strategic institutional investors.

An airline statement welcomed the government’s response, saying “it significantly increases Norwegian’s chances of working through the crisis caused by the pandemic.”

“We still have a lot of work ahead of us, but a participation from the government underscores that we are heading in the right direction,” Norwegian CEO Jacob Schram said separately.

Norwegian, Europe’s third largest low-cost airline until the pandemic paralyzed global air transport last year, has seen its debt and losses pile up since 2017.

The airline had a pre-COVID-19 fleet of 140 aircraft, of which only six are currently airborne, and the number of employees is down to 600, from more than 10,000 before the crisis.

The company plans to reduce debt to 20 billion kroner and put some 50 aircraft back into operation this year, followed by about 70 more in 2022.

It will also scrap long-haul subsidiaries in Britain, France, Italy and the US.