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The industrial sector
will see a higher rate of growth compared to other sectors of the
country’s economy. |
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The Economy: Where to Now? |
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The Iranian fiscal year
of 1381 AH (which came to an end on 20 March 2003) was marked by invaluable
experiences for the Iranian economy. In the year that passed, the country’s
economy was plagued by less tension from within the country and abroad, unlike
previous years. Relatively high oil revenue covered some of the country’s
economic gaps and as a consequence despite the budget deficit a degree of
stability was achieved. In 2002, Iran entered international monetary markets
for the first time by selling currency bonds. If we examine Iran’s economic
statistics we can confidently claim that the country achieved –and even
surpassed– the 5% economic growth rate it had forecast for the third five-year
development plan.
Agriculture:
Unlike previous years, Iran
enjoyed appropriate seasonal rains this year and this resulted in
approximately 10.1% of added value in an agriculture sector that had suffered
from negative value addition or very weak growth in previous years. Such a
remarkable agricultural growth has been unprecedented since the middle of the
second development plan. The agricultural sector is still neglected however,
even though with little investment it can be mechanized and its efficiency can
be boosted, as it already enjoys immense potential that has unfortunately been
neglected in the last three decades. It is sad to see that despite outstanding
growth, the investment in this sector is set to decrease in the New Year.
Oil and Gas:
In the oil sector, predictions
point to maximum value addition of 6%. Although the price of oil in the last
six months of 1381 AH (October 2002 – March 2003) was 50% higher than in the
first six months (April – September 2002). The country had surplus oil revenue
of $3 billion more than had been predicted in the budget. The lowering of
OPEC’s production quotas had a significant effect on restraining the added
value of oil.
| The
services sector is tipped to have an added value of 4.5% in the current
year. |
Industry:
The industrial sector will see a
higher rate of growth compared to other sectors of the country’s economy. The
industrial permits granted in the previous years became profitable last year
and also for this year and will result in a double-digit rate of growth for
the sector. Last year, the added value of the industries and mines sector was
assessed at 10% and it is forecasted that the growth will be lower at 7.4% in
the current Iranian fiscal year. Taking into consideration the industrial
permits to be granted in the current year –assuming they attract adequate
investment– the added value will exceed 11% in the coming years.
Real Estate:
Fluctuations in the real estate
market were not insignificant. In the first three months of 1381 AH (April –
July 2002) density restrictions were put in place, which led to the
skyrocketing of real estate prices, to an extent that unofficial statistics
told of a 30% price hike in Tehran. The increase in prices was followed by a
decrease in demand however, which made for a slump in the real estate market.
In the last four months of 1381 AH (December 2002 – March 2003) this
stagnation was to some extent relieved and the real estate market showed signs
of new life. The real estate sector had an added value equivalent to 13% and
it is expected to have a 9% to 10% growth in the current year.
Services:
The services sector is tipped to
have an added value of 4.5% in the current year. In the commercial balance
sector, studies and reports assert that the commercial balance will be
equivalent to $3.695 billion in the current year. Exports will consist of some
$20.231 billion worth of oil and gas and approximately $5.250 billion worth of
non-oil exports. This brings the total country’s exports to $25.480 billion.
The country’s imports are forecast to total $21.786 billion in the current
year.
Exports:
Compared to 1380 AH, (Iranian
fiscal year from 21 March 2001 to 20 March 2002) the country’s exports have
grown by some $1.57 billion, translating into 6.6%. Most of this export growth
was observed in the non-oil sector. The previous year’s non-oil exports were
15% higher than that of 1380 AH, whereas the exports of oil and gas only
enjoyed a 6.4% growth during the same period.
In any case, both domestic and foreign
experts acknowledge 1381 AH as a year of relative prosperity for Iran. But the
question that remains to be answered is: will this prosperity continue into
1382? Some studies answer this question in the positive, but assert that
sustaining the prosperity requires economic development, and no aspect of this
development must be doubted.
War, Iraq & OPEC:
What must not be forgotten is the
American-led war on Iraq in 1382 AH and its economic impact on Iran. There is
much to be said on this matter, but we will only address one point; after the
war, there is a good chance that Iraq will offer its oil at the full 3.5
million barrels per day capacity. This can have a significant overall effect
on OPEC and world oil markets. OPEC will only have two courses of action in
response to this. Either accept Iraq’s oil production capacity, in which event
other countries will also seek to boost their production quotas, or allow Iraq
to produce its oil outside the OPEC framework, which means the unofficial exit
of Iraq from OPEC and the addition of a country to the non-OPEC oil producing
states. Both of these actions will lead to a drop in oil prices in world
markets, which will impact Iran profoundly. Oil prices reduction for a country
which is heavily reliant on oil revenue like Iran, means a drop in hard
currency earnings and hence the inability to finance governmental and
non-governmental economic institutions, which will in turn render these
institutions much reduced in stature.
Therefore it seems that Iran’s economic
policymakers must come up with a plan for the country’s economy this year
which will avert crisis and maintain economic prosperity, a practical plan
that can be put into action. |
