Country Report Iran September 2009

Summary

Public criticism of the supreme leader, Ayatollah Ali Khamenei, because of his direct intervention in the political domain, has exposed a large breach in Iran's intricate power structure, which may weaken his authority.
The position of the president, Mahmoud Ahmadinejad, will be increasingly challenged by sections of the clerical establishment as well as by his reformist and pragmatic-conservative opponents, following his divisive re-election.
The Economist Intelligence Unit does not expect a military conflict between the US and Iran over the latter's nuclear programme in 2009-10. However, progress on negotiations between the two will be slow.
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 falls.
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.
We now forecast that average inflation will decline over the forecast period, from 25.5% in 2008 to 16.8% in 2009 and 14% in 2010, owing to a sharp drop in international oil and non-oil commodity prices, especially in 2009.

Highlights
Outlook for 2009-10: Domestic politics
Outlook for 2009-10: International relations
Outlook for 2009-10: Policy trends
Outlook for 2009-10: Fiscal policy
Outlook for 2009-10: Monetary policy
Outlook for 2009-10: International assumptions
Outlook for 2009-10: Economic growth
Outlook for 2009-10: Inflation
Outlook for 2009-10: Exchange rates
Outlook for 2009-10: External sector
Outlook for 2009-10: Forecast summary
The political scene: US agrees to talks with Iran despite a limited Iranian offer
The political scene: The president forms a new government
The political scene: A leading conservative paper demands national unity
The political scene: Commander's speech may hint at a further crackdown
The political scene: The universities may become targets
The political scene: The post-election opposition is beginning to flounder
Economic policy: Petrol imports steady as talk of embargo mounts
Economic performance: Gas pipeline to Pakistan signals improving relations
Economic performance: New oilfield discovery is made
Economic performance: Domestic contractors are given a bigger role in South Pars
Economic performance: UAE company denies gas export agreement with Iran
Economic performance: Iran bans the purchase of used Russian aircraft
Data and charts: Annual data and forecast
Data and charts: Quarterly data
Data and charts: Monthly data
Data and charts: Annual trends charts
Data and charts: Monthly trends charts
Data and charts: Comparative economic indicators
Basic data
Political structure