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Iran's GDP growth set to ease to 3.5 per cent next year - EIU

The Economist Intelligence Unit (EIU) predicted Tuesday that Real GDP growth in Iran would ease next year, mainly as a result in a downturn in oil prices, after reaching 6 percent in the year ending March 2004, higher than previously forecast, IRNA reported from London.

In its annual country by country forecast, the London-based consultancy estimated Iran's GDP growth would be 3.5 per cent in 2004-05, slightly higher than the 3.4 per cent average for the Middle East and North Africa.

Growth in Saudi Arabia next year was expected to be only 0.5 per cent and 1.1 per cent in Kuwait. Post-war Iraq was forecast to see by far the highest growth of 10.1 per cent in the Middle East, pushed up by reconstruction.

The latest report by the EIU on over 190 countries revised Real GDP growth in Iran to 6 per cent for 2003-04 against 5.4 per cent predicted last December.

The increase, it suggested, was partly due to relatively strong growth in oil production over the year as OPEC members compensated for disruptions in Iraq.

But the main driver of Iran's growth remains domestic demand that has strengthened significantly since international oil prices picked up in 2000, allowing restrictions on imports to be lifted, its report said.

With an expected downturn in oil prices next year, the EIU suggested that weakening export revenue would lead to some controls being reintroduced in Iran to slow import spending growth.

Iranian growth, it said, would be supported by relatively robust government consumption that will support a further rise in private consumption, but at a lower rate than in recent years.

The London-based consultancy also expected gross fixed investment to rise relatively strongly in Iran as the government strived to diversify the country's industrial base away from oil and to attract foreign investment to expand and improve the infrastructure and utilities.

Among the important measures introduced under a range of fiscal and structural reforms were the formation of Iran's first private banks and the establishment of a new, unified currency regime brought in at the start of the 2002-03 fiscal year.

The government's implementation of a new foreign investment act was also seen introducing significant measures to liberalise the non-oil investment environment.

The EIU said that despite a number of uncertainties, the legislation has prompted considerable foreign investment in Iran, where investment inflows outside the oil sector have been extremely limited.

Globally 2004 was expected to be a year of quickening recovery, with the US leading the way with a growth of 4 per cent, the fastest in a developed economy and in contrast to Western Europe, forecast to be the slowest region in the world with growth of only 2 per cent.

... Payvand News - 12/16/03 ... --

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