Country Report Iran May 2009

Outlook for 2009-10

• The president, Mahmoud Ahmadinejad, will face both conservative and opposition reformist challengers in the June 2009 election. Criticism over his handling of the economy may damage his re-election prospects.
• 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 strongly 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 strong 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 3.6% of GDP. The deficit will narrow to around 0.5% of GDP in 2010.

Monthly review

• Although the new US administration is still undertaking a review of its Iran policy, this has not stopped it from criticising the Islamic Republic, most recently over the latter's creeping influence in South America.
• Having imprisoned a US-Iranian journalist for eight years for spying, an Iranian appeals court has now acquitted Roxana Saberi of the most serious charges, thereby removing one obstacle to better US-Iranian relations.
• Iran's growing regional influence and ties with Lebanese and Palestinian factions have continued to stir unease among Arab leaderships.
• Four main contenders have officially registered for the presidential election on June 12th. Two conservative candidates, including Mr Ahmadinejad, and two reformist hopefuls must now await approval from the Guardian Council.
• Although the US is drawing up plans for a rapprochement with Iran, it has also threatened the country with "crippling" sanctions should future talks fail.
• Despite the massive fall in global commodity prices since late-2008, inflation has remained high in Iran, according to the latest central bank data.
• A UAE-based telecoms company, Etisalat, has had its award for a third mobile-phone licence revoked. Kuwait-based Zain has now been offered the licence.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48;20
NAICS Code: 517;311