Stag - exit on fast track
The government’s economic stimulus package consists of a “core” and several peripheral factors; “economic activities and exports” which are considered as driving force behind growth and “financial institutions” are the cornerstone of stag - exit plans and policies.
The government's economic stimulus package consists of a "core" and several peripheral factors; "economic activities and exports" which are considered as driving force behind growth and "financial institutions" are the cornerstone of stag-exit plans and policies. "Enabling business environment" and "macroeconomic environment" are the external factors to be taken into account. In the introductory part of the fourth chapter of the report, it has been proclaimed that in the current economic situation of the country, financial resources are very limited and international sanctions have imposed tough restrictions on commercial activities. As a result it is inevitable to opt for those high-yielding "sectors" which act as catalysts.
"Energy conservation", "oil, gas and petrochemical industry", "non-oil exports" and "real estate" have been cited as the driving forces behind exit from stagnation. As stated in the report "non-oil exports" is the major factor to create an avenue for growth in both short-term and long-term.
The report asserts that the government has no intention of "long-term" intervention to regulate the allocation of resources and the current short-term government intervention in the economy is to facilitate overcoming the economic crisis of 2012 and 2013.
Energy sector; fast and high rate of return
Energy (oil, gas and petrochemical industry) has played a crucial role in Iran's economy. Yielding high return, energy is at the core of economic activity and economic growth is inextricably linked to energy. Having said that, energy shortage poses a serious challenge to Iran's economy in order to encounter recession and move towards prosperity and growth. Therefore, development of energy sector could stimulate domestic production and exports in the short-term and strengthen "industry sectors" in the mid-term.
Energy conservation; an emerging market
According to this part of the report, the government has plans for energy reforms (first step was energy price reform in the second phase of Subsidy Reform Plan in 2014). Iran is moving towards "energy conservation" and efficient use of natural resources. Thus this emerging market opens up an opportunity for investors in various sectors (industry, construction, agriculture, transportation and service sector). An article of Iran's state budget (Iranian year of 1393) relates to measures to be taken in order to optimize energy consumption.
Accordingly, government plans include "development of gas distribution network and providing gas for more than two million families residing in small towns and villages", "development of gas distribution network in Sistan-and-Baluchistan province", "developing energy efficient heating systems in buildings", "productivity growth in rail transportation" and "urban rail transport system development" .
29 policies towards non-oil export growth and diversification
Decline in "purchasing power" has pushed Iran's supply-side recession towards the demand side of the economy. Thus measures to stimulate demand need to be taken into account by the government, nonetheless not by adopting expansionary monetary policies. Iranian government's economic team believes that the key to a positive shock in demand, GDP boost, government revenues and economic growth in the long-term is "non-oil exports". In comparison to oil exports, non-oil exports diversify the economy which leads to creation of jobs and education-job match in the country.
The government has developed a package of 29 policies to surmount the obstacles in the way of exports diversification.
Housing assistance and savings funds
Due to its linkage to various sectors of economy, "Real estate sector" is considered the fourth catalyst. The report asserts the crucial importance of this sector, yet it emphasizes non-inflationary exit from recession.
The administration pursues the policy of establishing "savings funds" to provide housing assistance for many families across the country by offering low rate mortgages. This would also stimulate demand and ease the recession. According to the government, Central Bank issues the license for establishment of savings funds for mortgage lenders (banks). The report further provides solutions and policies on effective "allocation of resources" to "industry and mining sector". As stated in the package, discriminatory practices are not acceptable and regardless of types of ownership, all industries are provided with financial support on equal terms by both capital and financial markets. Measures to strengthen small enterprises by linking them to medium and larger industries is a top priority.
For the purpose of proper and effective orientation of financial resources, it has been suggested that a panel of experts prioritizes manufacturing units and establishes a set of criteria."Productivity", "position in the value chain", "audited financial statements", "receivable accounts" and "providing working capital for small enterprises" are considered as essential standards in the current economic situation of Iran (transition era) for banks to grant loans and credit facilities.