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.
We also see gross fixed capital formation growth
slowing to 2.5% in 2009-2010, down from over 6% the
previous two years.
Domestic liquidity will be impacted by fewer petrodollars entering the
banking
system, leading to a slowdown in lending to businesses.
This
report is being written at a time when the global financial crisis –
which arose as a result of the
evaporation of inter-bank liquidity –
has moved into a new phase. Stock market participants appear –
reasonably – to have taken the view that the policy responses taken by
governments, central banks and
multi-lateral institutions will be
sufficient to prevent a total collapse of the global financial system.
Instead, stock market participants are focusing on the impact of a
(near)-global recession on the earnings
of non-financial companies.
The number and size of stand-by facilities agreed by the International
Monetary Fund (IMF) since early
mid-October supports our view that, of the
emerging markets whose commercial banking sectors are
surveyed by BMI, the
countries of Central and Eastern Europe (CEE) are those whose economies
are
most at risk of suffering adverse affects as a result of the global
financial crisis. This is partly because the
macro-economic imbalances are
relatively severe and partly because the Central and Eastern European
countries are more directly affected by the brutal recession that is unfolding
in wealthier member states of
the European Union.
As yet, it has not
been possible to collate hard numbers for most of the countries whose
commercial
banking sectors are surveyed by BMI that clearly quantify the
impact of the global financial crisis on the
banks. As we explain in the
section that discusses changes that we are making to the report, we again
include a lengthy essay which attempts to identify the key issues. In essence,
in the emerging markets
(and, indeed, the developed countries) of the
Asia-Pacific, commercial banks appear to be well placed to
deal with the
crisis. The same is, broadly, true of commercial banks in the various
countries of the Middle
East and North Africa. In Latin America, Chile,
Brazil, Mexico and Colombia appear better placed than
Argentina,
Venezuela, Bolivia and Ecuador. South Africa’s situation appears to have
much in common
with that of Brazil. In contrast, Nigeria faces some of the
same challenges as those that confront
Venezuela. The positions of most
countries in Central and Eastern Europe, however, are alarming.
From Q209,
we will include data that pertain to late 2008 and will extend forecasts out
to 2013. We will
also incorporate much greater discussion of the various
protagonists in each country’s commercial
banking sector and a
number of new features. We believe that the figures we compiled in
mid-2008
provide insights as to how the various commercial banking sectors
will fare in the current, extremely
uncertain, environment. We have
therefore left them essentially unchanged.
The figures on the tables above
provide a snapshot of the banking sector in Iran prior to the onset of the
global financial crisis. To place the figures in context, it may be useful to
bear in mind certain aspects of
the 59 countries whose banking sectors are
currently surveyed by BMI. Across this sample, the median
growth in assets
in local currency terms was 21.3% (in Colombia). The median loan growth was
21.6%
(in India). The median growth in deposits was 17.9% (in Brazil).
On their own, the ratios of loans to deposits, assets, and GDP mean little.
However, they can provide
useful hints when combined with other data.
Across the 59 countries, the median loan/deposit ratio is
92.3% (in
Greece). The median loan/asset ratio is 56.0% (in Poland). The median loan/GDP
ratio was
63.9% in India.
As in previous reports, we include a SWOT
analysis for Iran. We suggest that the key issue remains, as
always, oil.
Iran is the world’s second-largest oil producer and its economy is quite
dependent on
petrodollars. Movements in the price of oil impact the
economy profoundly. Within the banking sector the
key factors are its
relatively small size and lack of independence.
CBBER for Iran
Iran’s overall CBBER of 46.7 is towards the lower end of the countries
in the Middle East and Africa
region that are surveyed by BMI. This score
is underpinned by a solid if not spectacular score of 54.4 on
the heavily
weighted banking market structure of the limits to potential returns element.
This is reflective
of the sheer scale and entrenched position of the
Iranian banking system within the Iranian economy,
which is comparatively
large for the region, rather than a high level of development.
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