Country Report Iran March 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 have lowered Iran's real GDP forecast to just 1.1% 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 3% in 2010/11.
• Average consumer price inflation is expected to decline strongly over the outlook 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 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 3.8% of GDP. The deficit will narrow to around 0.5% of GDP in 2010.

Monthly review

• A new US policy on Iran is beginning to take shape two months after Barack Obama became president. Mr Obama is trying to build consensus within the US and externally over a new diplomatic strategy.
• At the same time, the EU is considering tightening sanctions against the Islamic Republic over its nuclear programme, although the bloc remains split over the extent of unilateral measures.
• Less than two months before the official deadline for nominations, three reformist politicians have confirmed their candidacies for the June presidential election. The reformist vote will, therefore, be heavily split.
• The capital market regulator has sought permission from parliament to remove two regulationsrelated to shares and stakeswhich deter foreigners from investing in the Tehran Stock Exchange.
• The partial privatisation of Bank Mellatthe first attempt at a bank sell-off in Iranhas proven unsuccessful after it sold less than 60% of a 5% stake offered in the bank in February.
• Iranian officials have claimed that trade with neighbouring Iraq has reached US$3bn for the first nine months of the current fiscal year.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52