Archive for the ‘Iran-economy’ Category:
The first round of privatization of Bank Mellat, which is Iran’s second largest bank was not a particularly successful one. This was due to Tehran Stock Exchange suffering a 35% decline recently, due to falling price if oil, and high inflation rate which reduce the value of share dividends. The article below from Press TV explains more:
By: Meir Javedanfar
Global Trends 2025, a new report written by the US National Intelligence Council (NIC) was released on Friday 21st of November. The full version of the report makes some interesting readings about Iran. Here is an excerpt about Iran’s demographic and economic outlook:
“Two additional demographic near-certainties are apparent: first, despite low fertility, Iran’s population of 66 million will grow to around 77 million by 2025. Second, by then, a new youth bulge (an echo produced by births during the current one) will be ascending— but in this one, 15-to-24 year olds will account for just one-sixth of those in the working age group compared to one third today.
Some experts believe this echo bulge signals a resurgence of revolutionary politics.
Others speculate that, in the more educated and developed Iran of 2025, young adults will find career and consumption more attractive than extremist politics. Only one aspect of Iran’s future is sure: its society will be more demographically mature than ever before and strikingly different than its neighbors”.
“Although the rise of no other state can equal the impact of the rise of such populous states as China and India, other countries with potentially high-performing economies—Iran, Indonesia, and Turkey, for example—could play increasingly important roles on the world stage and especially for establishing new patterns in the Muslim world”.
Analysis: This shows that Iran’s falling birthrate, from more than six children per woman in 1985 to less than two today, will reduce the burden on Iran’s economy. This will lead to more jobs being available, and less mouths to feed and to care for, by the government.
This is good news. However, I believe that lack of investment in Iran’s non oil exports, very little investment in renewable sources of energy and falling levels of investment in education will mount serious challenges, and could reduce the chances for realization of the report’s forecast about Iran.
The lack of infrastructure in renewable energy alone is one major factor. Billions will have to be spent on research and implementation of sources (eg. solar, wind), and more on changing Iran’s energy transportation infrastructure. Furthermore, with forecasts about a fall in oil income, Iran will need massive investment in its non oil sector, in industries which will provide the country with competitive advantage over its neighbours. This is not forthcoming in any meaningful manner.
16 years is not a long time in making such important changes. Unless Iran turns its economy around in the next few years and improves its relations with the West, it could in fact lose its clout in the Muslim world and in the Middle East to Persian Gulf countries, especially Saudi Arabia and Turkey. For now, I don’t see any positive signs on the horizon for Iran’s economy, or relations with the West.
By: Meir Javedanfar
In terms of oil income, the government of president Ahmadinejad has been very lucky. Its is estimated that Iran will earn close to $70 billion from the sale of oil this financial year. This is equivalent to more than 3 years of income from the time when Ayatollah Rafsanjani was in charge of the presidential office, from early to mid 1990s.
However, with high income, comes high responsibility. While the government of Ayatollah Khatami created the Oil Stabilization Fund (OSF) for future emergencies, like when oil prices drop, Ahmadinejad, instead of adding, took money from the OSF to finance his projects. This is despite high oil prices.
With presidential elections less than 10 months away, the Iranian president is going on a massive spending spree. This financial year, it is estimated that his government will have accumulated a $10 billion deficit. Some believe that this figure will rise even more. With a budget totaling $296 billion for 2008-2009, that’s less than a 3% deficit figure, equivalent to half of Israel’s 6% deficit. Nevertheless, with runaway inflation rate of 20%, president Ahmadinejad is well advised by his economic consultants, who have called for reduction in spending.
Inflation as well as making Iran more internationally isolated than ever before, are some of the most notable failure of his term. The former is one area which his domestic competitors can publicly use against him, and will.
However public criticism of the latter is the confined to very few politicians, whose word mean very little, unless they have the backing of the Supreme Leader.