Abstract
The coming year will be a tough one for Iran. Economic growth will slow,
mirroring the slowdown in all
the major economies of the world, and we now
see real GDP growth in 2009/2010 (note: Iranian years
begin in March)
falling to just 2.4%, down from 4.7% in 2008/2009. While we are not expecting
Iran to
fall into recession, our projected growth rate would be the most
lacklustre in a decade. Thereafter, growth
will begin to pick up again, in
line with a slow recovery in the global economy, and over the course of
the
forecast period (2009/2010 to 2013/2014) we expect growth to average
3.6%. This is substantially below
an estimated 5.6% average growth rate
over the previous five years, when economic expansion was
driven in large
part by the oil boom.
Although Iran may be relatively isolated in
diplomatic terms, the theory of a decoupled developed and
developing world
is increasingly being shown to be wishful thinking and we do not believe that
the
Islamic Republic will be able to hide from the gathering global
headwinds. Indeed, as the world' s fourth
largest oil producer, with crude
sales making up over 80% of total export revenues, Iran' s economic
health
is intrinsically tied to the state of the global economy. With global
macroeconomic conditions
deteriorating rapidly - we recently revised down
our global growth forecast for 2009 to just 0.3%, with
risks to the
downside such that an outright contraction cannot be ruled out - demand for
oil is likely to
continue to weaken, weighing on prices well into the
medium term. As such, we have cut our average
OPEC Basket oil price
forecasts to US$46.50 per barrel (bbl) and US$58.50/bbl for 2009 and 2010
respectively.
Although the Iranian economy is not dominated by the oil
sector in the way that some of the other oil-rich
Gulf states are, in
nominal terms the sector has still constituted well over 20% of GDP for the
past seven
years, and so relatively low oil prices will have considerable
repercussions. Indeed, we forecast the
sector' s nominal value to contract
38.0% in 2009/2010, falling to a little less than 14% of total GDP
(from
an expected 24.0% in 2008/2009). In local currency terms, this will drag down
nominal GDP
growth to less than 10%, and nominal GDP per capita growth to
around 7%. Considering that we expect
inflation to average 20% y-o-y
through 2009/2010, the average Iranian is therefore likely to feel
noticeably poorer over the coming year: in real terms, i.e. subtracting
inflation, we expect GDP per capita
to contract by around 13%.
In the
Middle East and North Africa, we profile 17 companies. These are AGF, AIG,
Allianz, Aviva,
AXA, Cardif, ERGO, Eureko, Fortis, Generali, Groupama,
HSBC Insurance, Liberty Mutual,
MAPFRE, RSA, UNIQA and Zurich Financial
Services. We also look at a number of the smaller local
firms that are
active in the region, particularly in Kuwait, Oman, Saudi Arabia and the
UAE.
In addition, we discuss the regional presence of Belgium' s KBC and
Austria' s Erste Bank through a
number of insurance subsidiaries and
explain the importance, for each of the various countries, of purely
domestic firms.
Over the course of 2008, estimated total premiums in Iran
rose by 23% to IRR40,477,237mn. Non-life
premiums rose by 24% to
IRR38,335,383mn, while life premiums rose by 15% to IRR2,142,056mn.
Between now and the end of the forecast period, we expect that annual non-life
premiums will rise by
IRR48,135,011mn, while annual life premiums should
rise by IRR2,572,850mn.
Growth in non-life premiums should be driven by
the general growth in nominal GDP: we are assuming
that non-life
penetration remains constant at the current level of around 1.11% to
1.30%.
Growth in life premiums should be driven by the change in the
overall population and a rise in life density
from US$2.84 to US$5.00 per
capita.
BMI' s Insurance Business Environment Rating for Iran is 34.6.
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