The International Monetary Fund (IMF) recently forecasted a real GDP growth of 3.4 percent in Iran this year. The growth rate is expected to swell to 4 percent in 2001, higher than that in Saudi Arabia and Kuwait.
The Consumer Price Index (CPI) in Iran, which reflects the overall level of prices, is expected to fall from 16 percent in 2000, to 13 percent in 2001, the IMF’s World Economic Outlook report revealed.
Rebounding crude oil prices and expanding OPEC quotas have jumpstarted the oil-based economies of several Mid-East nations. The IMF report projected that economic growth among oil-producing nations in the Persian Gulf would "turn positive in 2000 and remain so in 2001." The forecast is based on stronger fiscal balances, greater domestic demand and improved consumer confidence, IRNA reported.
Iran's economy faces longer-term challenges, too, including the diversification to make it less dependent on oil revenues. Macroeconomic variables such as the unemployment rate and inflation remain high in the Islamic Republic. Besides persistent unemployment and inflation, other problems faced by Iran's economy include: a rapidly growing, young population with limited job prospects; heavy dependence on oil revenues (about half the state's budget and 80 percent of the country's hard currency earnings); and $16 billion in external debt (including a high proportion of short-term debt).
In efforts to tackle its economic problems, the government is targeting increased transparency in the macroeconomic system and current regulations, reform in the budget structure and tax system, reduction of government role in the economy and the privatization of public companies in its third five-year development plan, Iranian Trade reported.
Iran also hoped to attract billions of dollars worth of foreign investment to the country by creating a more favorable investment climate. This would involve a variety of measures, including possible constitutional amendments, reduced "red tape," reduced restrictions and duties on imports, creation of free-trade zones, and increased safety of foreign investments.
Strict Constitutional interpretations limiting foreign investment and unreasonable pro-employee labor laws present a major obstacle to those interested in acquiring or investing in Iranian companies. In October 1999, Iran's government opted to open up its mining and metals sectors to foreign investors. The banking sector was also recently opened to foreigners. – (Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)
