Abstract
Iran’s construction sector is continuing to post strong growth, with BMI
forecasting a compound annual
growth rate of 12.2% for 2008-2013, despite
the impact of the global financial crisis. Part of the reason
for the
impressive growth is that there remains a severe shortage of housing stock in
Iran with the Tehran
Times claiming that demand stands at around 1.5mn
housing units per year, while only around 700,000
are completed each year.
Meanwhile, Iran is planning a number of large-scale projects in the energy
sector. A particular point of focus is the country’s refining capacity
with National Iranian Oil Refining
& Distribution Company (NIORDC)
planning to build seven new oil refineries. With speculation that
the US
could target Iranian fuel imports in a new round of economic sanctions, Iran
is keen to build up
domestic capacity in this area.
Indeed, the issue
of nuclear power remains high on the agenda. Iran carried out the first
testing of its
Bushehr Nuclear Power plant in February 2009. The
controversial power plant has been years in the
making and is finally
complete. The nuclear plant was built with the help of Russia, and according
to
Sergei Kiriyenko, head of the Russian nuclear agency: ' The construction
stage of the nuclear power plant
is over, we are now in the
pre-commissioning stage, which is a combination of complex procedures,' as
quoted by AFP. Meanwhile, according to the International Atomic Energy Agency
(IAEA), Iran
continues to increase its stockpile of low enriched uranium
(LEU), which can be used as fuel for nuclear
power stations. Meanwhile,
the IAEA' s latest report states that no substantive progress has been made
in
settling outstanding issues about ' possible military dimensions to
Iran' s nuclear programme' . This could
result in the US and the UN
increasing sanctions on the country.
In other infrastructure news, the
Fars News Agency has reported that private companies are to be invited
to
participate further in Iran' s freight rail sector, with permission for private
enterprises to operate 5,000
wagons, to be given in early 2009. BMI notes
that the percentage of freight carried by rail in Iran is
slipping against
road, and a partial infrastructure projects privatisation could boost growth
in the sector,
especially as a number of cross-border are underway that
will improve the country' s rail links with its
neighbours.
Meanwhile,
as a result of the global economic downturn, BMI expects Iran’s real GDP
growth to fall to
2.4% in 2009, down from an estimated 4.7% in 2008. While
we do not expect Iran to fall into recession, it
could well feel that way.
As a result of low oil prices, nominal GDP will barely grow at all – we
see 0.9%
expansion in local currency terms – and due to our
expectations for the rial to weaken through the year,
we expect GDP per
capita in US$ dollar terms to contract by nearly 11%. This is likely to have
negative
impact on the infrastructure and the construction sector, which
we expect to suffer a sharp contraction of
12% in real terms in 2009
before returning to growth in 2010.
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