Country Report Iran June 2009

Outlook for 2009-10

• The president, Mahmoud Ahmadinejad, will face potent challenges from both conservative and opposition reformist rivals in the June election. Whatever the result, the intensity of the campaign points to a period of turbulence in its aftermath.
• The Economist Intelligence Unit does not expect Iran's nuclear activities to lead to war with the US in 2009-10. We believe that the new US government 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 forecast that Iran's real GDP growth will slow to just 0.5% in fiscal year 2009/10 (March 21st-March 20th), as a result of the marked slowdown in the global economy. We expect real GDP growth to recover to 2.9% in 2010/11.
• Average consumer price inflation is expected to decline over the forecast period, from 25.5% in 2008 to 19.1% in 2009 and 16.5% in 2010, owing to a sharp drop in international oil and non-oil commodity prices.
• The 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 2.3% of GDP. A modest surplus of around 0.2% of GDP is expected in 2010.

Monthly review

• Just days ahead of the presidential election, all four candidates have been laying out their respective programmes on both domestic and foreign policy. Mr Ahmadinejad has come under stiff criticism for his economic record.
• Mr Ahmadinejad has threatened to expose corruption within the higher ranks of Iranian society. He has also defended his handling of foreign policy.
• The run-up to the election has been marred by violence, including the bombing of a mosque in the south-eastern city of Zahedan, which killed around 19 people and raised concerns over sectarian unrest in the country.
• The call by the US president, Barack Obama, for better US relations with the Muslim world has been cautiously welcomed by Iran.
• Officials have not clarified why a third mobile-phone licence award was withdrawn from a UAE telecoms operator and handed to a Kuwait-based one.
• The presidents of Iran and Pakistan have signed a deal which will lead to the supply of Iranian gas to Pakistan by 2014.
• Media reports in early June have suggested that an Indian firm has stopped exporting petrol to Iran in response to US pressure.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49
NAICS Code: 22