the rt hon sir edward george gbe : overview of recent financial and economic developments in iran speech by the rt hon sir edward george gbe, governor of the bank of england, at the iran invest 2000 conference, held in london, on 28 september 2000. * * * i am delighted to be able to take part in this conference, and particularly pleased to be sharing the platform this morning with governor mohsen nourbakhsh of the central bank of iran, bank markazi. i first met governor nourbakhsh soon after he became governor in 1994 - which was not an easy time for iran. i was immediately impressed not only by his command of the issues confronting him - which was perhaps not surprising : it was his second period in office as governor, having in the meantime taken a vacation as minister of economic affairs and finance, and as deputy to the president, with responsibility for economic affairs. but i was immediately impressed too by his calm and always reasoned approach and by his reliability. he has played an important role in steering his country through a difficult period to the more promising prospect that iran faces today. since our first meeting, i have very much enjoyed the opportunity of seeing the governor periodically at a whole series of international meetings, and it is a very great pleasure, mohsen, to be able to join in welcoming you here to london this morning. i have been immensely interested in - and greatly encouraged by - what you have had to tell us. perhaps i might add a few observations of my own - from my inevitably more distant perspective. for much of the past two or three years the external environment facing iran was a difficult one. the slowdown in world economic growth in the wake of the global financial crisis and the associated fall in oil prices - to an unsustainably low level - significantly weakened the financial positions of all major oil - exporting countries. iran was no exception. the current account swung from a surplus of 2. 2 % of gdp in 1997 / 98 to a deficit of over 2 %. and the fiscal position deteriorated to a deficit of 6. 7 % of gdp. but iran ’ s response to worsening economic conditions was a positive one. the authorities began to formulate a medium - term reform strategy, which has now been articulated as the third five year development plan. since then, the combination of sound economic management at home, coupled with continued economic expansion in the industrial countries and rising oil prices, have improved iran ’ s prospects

imbalances ” caused by domestic distortions ( for example, in the financial or social welfare systems that affect savings and investment decisions ) ; global deficiencies ( such as inadequate global safety nets which encourage reserve accumulation ) ; or mercantilist and protectionist policies ( which manage trade ). and that is part of what is occurring today, with japan, germany and china running excess surpluses relative to fundamentals ; and the us and the uk running excess deficits ( chart 2 ). and although the euroarea excess surplus is relatively modest relative to its gdp, in absolute terms it is at least as important as those of japan or china ( chart 3 ). so while the distortions are few in number, those that exist are large in scale and systemic in importance. canadian deficits averaged 8 % of gdp in the thirty years before world war i. ‘ canada in a multi - polar world ’, speech by mark carney, 16 may 2011, available at http : / / www. bankofcanada. ca / 2011 / 05 / canada - in - a - multi - polar - world. see lisack, n., sajedi, r. and thwaites, g. ‘ demographic trends and the real interest rate ’, bank of england staff working paper forthcoming. small economies hosting large financial centres like singapore and switzerland are special cases for which it is difficult to estimate ‘ norms ’. all speeches are available online at www. bankofengland. co. uk / speeches chart 2 : actual current account balances and imf estimates of fundamental balances sources : imf july 2016 external sector report, weo april 2017 and bank calculations. notes : the data point for the 2016 current account for the uk has been adjusted ; see notes to chart 1 for more details. chart 3 : excess current account balances sources : imf july 2016 external sector report and weo april 2017. notes : excess is calculated as the difference between the actual current account balance in 2016 and the mid - point of the range of imf estimates of the fundamental balances, shown in chart 2. the data for the 2016 current account for the uk has been adjusted ; see notes to chart 1 for more details. such global imbalances matter for at least three reasons. first, from the lawson boom to the tequila and global financial crises, a common lesson is that large current account deficits are one of the most trenchant early warning signs of financial instability.