Country Report Iran February 2009

Outlook for 2009-10

• The president, Mahmoud Ahmadinejad, will continue to enjoy the support of the supreme leader, Ayatollah Ali Khamenei. Criticism over his handling of the economy, however, may damage his re-election prospects in June 2009.
• The Economist Intelligence Unit does not expect Iran's nuclear activities to lead to war in 2009-10. We believe that the new US administration may open direct talks with Iran, but only after Iran's presidential election.
• The hydrocarbons industry, which provides over 80% of government revenue, will continue to suffer from insufficient investment, as foreign companies remain, in effect, excluded from the country and as oil revenue plummets.
• We now forecast that Iran's real GDP growth will slow markedly, to 2.4%, in fiscal year 2009/10 (March 21st-March 20th), as a result of the slowdown in the global economy, but that it will recover to 3.8% in 2010/11.
• Average consumer price inflation is expected to decline over the outlook period, from 25.4% in 2008 to 21% in 2009 and 17.5% in 2010, owing to a sharp drop in international oil and non-oil commodity prices.
• The sharp decline in international oil prices in 2009 will have a severe impact on the current account, which we forecast will slip into a deficit of 4.7% of GDP. The deficit will narrow to around 0.3% of GDP in 2010.

Monthly review

• Mohammed Khatami, the former two-term reformist president, has announced his candidacy for the presidential election in June. His confirmation followed months of indecision over whether to run again.
• The new US president, Barack Obama, has indicated a willingness to engage directly with Iran.
• Iranian officials have cautiously welcomed Mr Obama's new approach. However, conservative elements within the regime have warned against taking part in negotiations.
• On February 3rd Iran launched its first home-made satellite into space, a move that the president heralded as a major scientific achievement for Iran.
• Ayatollah Khamenei has released an outline of the 2010-15 development plan, which sets an ambitious target of 8% GDP growth a year over the period.
• Mr Ahmadinejad has submitted to parliament his proposals for the 2009/10 budget, which projects a 40% fall in revenue compared with the previous year and a 2.5% cut in expenditure.
• The partial sell-off of the state-owned Telecommunications Company of Iran has been postponed until 2009/10.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;47
NAICS Code: 336;48