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Iranian economy raced ahead last year due to favorable policies

The Iranian government said in Tehran on Sunday that due to oil revenues, the gross domestic product (GDP) rose from five percent in Iranian year of 1379 (2000-2001) to 3.3 percent in the following year, IRNA reported.

The State-affiliated Council for Information Dissemination said based on Central Bank of Iran's (CBI) accounts the economy grew by an impressive 7.4 percent last year (which ended on March 20). "Putting the oil revenue aside, the GDP rose form 4.5 percent in 1379 to 5.1 percent in 1380 and 7.8 percent last year."

Although, the report added, the agriculture sector's growth plummeted from 3.3 percent in 1379 to 0.7 percent in 1380, due to conducive climatic conditions, adequate rainfall and favorable fiscal and monetary policies, the rate jumped to 11.7 percent last year. Meanwhile, the rate of growth in oil and gas sector stood at 8.3 percent in 1379, 8.1 percent in 1380 and 5.1 percent last year, it said.

Th total volume of production in industry and mines sector registered a 9.5 percent growth in 1379, 4.8 percent in 1380, registering an impressive 11.8 percent growth last year. The report further said that service sector grew at a satisfactory pace of 2.9 percent, 4.8 percent and 5.1 percent in 1379, 1380 and 1381 respectively.

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

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

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.

... Payvand News - 12/29/03 ... --

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