| IRAN |
Economy:
Iran's economy is marked by an inefficient state sector, reliance on the oil sector, which
provides the majority of government revenues, and statist policies, which create major
distortions throughout the system. Private sector activity is typically limited to small-scale
workshops, farming, and services. Price controls, subsidies, and other rigidities weigh
down the economy, undermining the potential for private-sector-led growth. Significant
informal market activity flourishes. The legislature in late 2009 passed President Mahmud
AHMADI-NEJAD's bill to reduce subsidies, particularly on food and energy. The bill would
phase out subsidies - which benefit Iran's upper and middle classes the most - over three
to five years and replace them with cash payments to Iran's lower classes. However, the
start of the program was delayed repeatedly throughout 2010 over fears of public reaction
to higher prices. This is the most extensive economic reform since the government
implemented gasoline rationing in 2007. The recovery of world oil prices in the last year
increased Iran's oil export revenue by at least $10 billion over 2009, easing some of the
financial impact of the newest round of international sanctions. Although inflation has fallen
substantially since the mid-2000s, Iran continues to suffer from double-digit unemployment
and underemployment. Underemployment among Iran's educated youth has convinced
many to seek jobs overseas, resulting in a significant "brain drain."
GDP (purchasing power parity):
$818.7 billion (2010 est.)
country comparison to the world: 20
$810.3 billion (2009 est.)
$809.8 billion (2008 est.)
note: data are in 2010 US dollars
GDP (official exchange rate):
$357.2 billion (2010 est.)
GDP - real growth rate:
1% (2010 est.)
country comparison to the world: 175
0.1% (2009 est.)
1% (2008 est.)
GDP - per capita (PPP):
$10,600 (2010 est.)
country comparison to the world: 105
$10,700 (2009 est.)
$10,800 (2008 est.)
note: data are in 2010 US dollars
GDP - composition by sector:
agriculture: 11%
industry: 45.9%
services: 43.1% (2010 est.)
Exports - commodities:
petroleum 80%, chemical and petrochemical products, fruits and nuts, carpets
Exports - partners:
China 16.58%, Japan 11.9%, India 10.54%, South Korea 7.54%, Turkey 4.36% (2009)
Imports - commodities:
industrial supplies, capital goods, foodstuffs and other consumer goods, technical services
Imports - partners:
UAE 15.14%, China 13.48%, Germany 9.66%, South Korea 7.16%, Italy 5.27%, Russia
4.81%, India 4.12% (2009)
Extracted from IMF Report - Islamic Republic of Iran: 2011 Article IV
Consultation (August 2011)
Background and outlook: Growth recovered on the strength of international oil prices,
strong rebound in agricultural sector and rapid credit expansion. Inflation was contained
while fiscal and external positions improved. The launch of the subsidy reform in December
2010 has increased inflation temporarily and is expected to result in a temporary slowdown
of economic growth. While high oil prices and efficiency gains resulting from the subsidy
reform should support rapid economic recovery, an accommodative policy stance could
lead to high inflation and derail reform efforts.
Policies priorities: Key priorities are to (i) maintain short term macroeconomic stability to
support the reform process; (ii) transition further to a market-based economy to foster
growth and support job creation; and, (iii) strengthen the financial sector.
Staff Recommendations:
- Coordinated and tight credit and fiscal policies are essential to maintain
macroeconomic stability in the aftermath of the subsidy reform.
- The authorities should continue to flexibly manage the exchange rate, and maintain
a unified exchange rate.
Achieving higher growth and creating new jobs will require restructuring the
corporate sector, supporting the creation of new enterprises, removing labor market
frictions, encouraging foreign investment, and accelerating the ongoing privatization
process.
- Addressing the banking sector’s large NPLs portfolio, and strengthening capital
adequacy and profitability are essential to allow the banking sector to support growth.
Authorities’ Views:
- Steadfast implementation of the subsidy reform will continue, while preserving
macroeconomic stability in the transition period, including through limiting central
bank credit to banks and possible increasing interest rates.
- Corporate restructuring might require more subsidized loans and financing.
- Recapitalizing public banks, further reducing NPLs, enhancing central bank
supervision, and introducing a deposit guarantee fund are important elements of the
banking reform strategy.
Recent Economic Developments
Economic growth accelerated from the cyclical downturn in 2008/09.
A severe drought and cuts in oil production slowed growth to 0.6 percent in 2008/09.
However, a sharp rebound in agriculture production supported modest economic recovery
in 2009/10 and further expansion in 2010/11. The distribution of cash transfers to
households is estimated to have partly offset the negative impact of the energy price
increases on domestic demand, resulting in a moderate decline of real GDP growth from
3.5 percent in 2009/10 to 3.2 percent 2010/11. On the strength of high oil prices, the
current account surplus improved to 6 percent of GDP in 2010/11.
Building upon their success in reducing inflation over the last few years, the authorities
were able to contain inflation in the aftermath of the subsidy reform. The authorities’
monetary policy implementation brought down annual average inflation from 25.4 percent
in 2008/09 to 12.4 percent in 2010/11. Despite the very large domestic energy price
increases in December, inflation remained relatively contained. Numerous administrative
measures, such as price monitoring and enforcement of price transparency and the
accumulation of inventories of strategic foodstuffs, helped slow down the pass-through of
higher energy prices into other prices. While there was an almost doubling of the central
bank’s claims on banks (related mainly to the financing of subsidized housing), the central
bank sterilized this increase by selling foreign exchange. As a result, consumer price
inflation only increased from 10.1 percent in December to 14.2 percent at end-May 2011,
with the average monthly inflation rate for January–May reaching only 2¼ percent.
The fiscal surplus improved in 2010/11 to 1.7 percent of GDP, reflecting prudent
spending policies. In particular, the authorities reduced capital spending, and saved some
of the extra revenue from increased oil prices in the newly established National
Development Fund.
Click here to view full report
Banking
In 1979, the government nationalized all private banks. A banking system was
subsequently created where, in accordance with Islamic law, interest on loans was
replaced with handling fees. This system went into effect in the mid-1980s. The Central
bank, the Bank Markazi, issues currency and oversees all state and private banks. The
government began to privatize the banking sector in 2001 when licenses were issued to
two new privately owned banks.
There are a few foreign bank branches and representative offices in the country who are
allowed to undertake administrative and coordination activities but are not permitted to
open customer accounts inside Iran, receive deposits or extend normative facilities.
In 2010 there were major concerns that the Iranian banking system is in crisis, weighed
down by a proliferation of non-performing loans.
Stock Exchange
The Tehran Stock Exchange opened in February 1967. Most early listings were
Government bonds and certain State-baked certificates.
The Tehran Stock Exchange has evolved to where individual and institutional investor can
trade securities in over 420 companies.
Iran's economy is marked by an inefficient state sector, reliance on the oil sector, which
provides the majority of government revenues, and statist policies, which create major
distortions throughout the system. Private sector activity is typically limited to small-scale
workshops, farming, and services. Price controls, subsidies, and other rigidities weigh
down the economy, undermining the potential for private-sector-led growth. Significant
informal market activity flourishes. The legislature in late 2009 passed President Mahmud
AHMADI-NEJAD's bill to reduce subsidies, particularly on food and energy. The bill would
phase out subsidies - which benefit Iran's upper and middle classes the most - over three
to five years and replace them with cash payments to Iran's lower classes. However, the
start of the program was delayed repeatedly throughout 2010 over fears of public reaction
to higher prices. This is the most extensive economic reform since the government
implemented gasoline rationing in 2007. The recovery of world oil prices in the last year
increased Iran's oil export revenue by at least $10 billion over 2009, easing some of the
financial impact of the newest round of international sanctions. Although inflation has fallen
substantially since the mid-2000s, Iran continues to suffer from double-digit unemployment
and underemployment. Underemployment among Iran's educated youth has convinced
many to seek jobs overseas, resulting in a significant "brain drain."
GDP (purchasing power parity):
$818.7 billion (2010 est.)
country comparison to the world: 20
$810.3 billion (2009 est.)
$809.8 billion (2008 est.)
note: data are in 2010 US dollars
GDP (official exchange rate):
$357.2 billion (2010 est.)
GDP - real growth rate:
1% (2010 est.)
country comparison to the world: 175
0.1% (2009 est.)
1% (2008 est.)
GDP - per capita (PPP):
$10,600 (2010 est.)
country comparison to the world: 105
$10,700 (2009 est.)
$10,800 (2008 est.)
note: data are in 2010 US dollars
GDP - composition by sector:
agriculture: 11%
industry: 45.9%
services: 43.1% (2010 est.)
Exports - commodities:
petroleum 80%, chemical and petrochemical products, fruits and nuts, carpets
Exports - partners:
China 16.58%, Japan 11.9%, India 10.54%, South Korea 7.54%, Turkey 4.36% (2009)
Imports - commodities:
industrial supplies, capital goods, foodstuffs and other consumer goods, technical services
Imports - partners:
UAE 15.14%, China 13.48%, Germany 9.66%, South Korea 7.16%, Italy 5.27%, Russia
4.81%, India 4.12% (2009)
Extracted from IMF Report - Islamic Republic of Iran: 2011 Article IV
Consultation (August 2011)
Background and outlook: Growth recovered on the strength of international oil prices,
strong rebound in agricultural sector and rapid credit expansion. Inflation was contained
while fiscal and external positions improved. The launch of the subsidy reform in December
2010 has increased inflation temporarily and is expected to result in a temporary slowdown
of economic growth. While high oil prices and efficiency gains resulting from the subsidy
reform should support rapid economic recovery, an accommodative policy stance could
lead to high inflation and derail reform efforts.
Policies priorities: Key priorities are to (i) maintain short term macroeconomic stability to
support the reform process; (ii) transition further to a market-based economy to foster
growth and support job creation; and, (iii) strengthen the financial sector.
Staff Recommendations:
- Coordinated and tight credit and fiscal policies are essential to maintain
macroeconomic stability in the aftermath of the subsidy reform.
- The authorities should continue to flexibly manage the exchange rate, and maintain
a unified exchange rate.
Achieving higher growth and creating new jobs will require restructuring the
corporate sector, supporting the creation of new enterprises, removing labor market
frictions, encouraging foreign investment, and accelerating the ongoing privatization
process.
- Addressing the banking sector’s large NPLs portfolio, and strengthening capital
adequacy and profitability are essential to allow the banking sector to support growth.
Authorities’ Views:
- Steadfast implementation of the subsidy reform will continue, while preserving
macroeconomic stability in the transition period, including through limiting central
bank credit to banks and possible increasing interest rates.
- Corporate restructuring might require more subsidized loans and financing.
- Recapitalizing public banks, further reducing NPLs, enhancing central bank
supervision, and introducing a deposit guarantee fund are important elements of the
banking reform strategy.
Recent Economic Developments
Economic growth accelerated from the cyclical downturn in 2008/09.
A severe drought and cuts in oil production slowed growth to 0.6 percent in 2008/09.
However, a sharp rebound in agriculture production supported modest economic recovery
in 2009/10 and further expansion in 2010/11. The distribution of cash transfers to
households is estimated to have partly offset the negative impact of the energy price
increases on domestic demand, resulting in a moderate decline of real GDP growth from
3.5 percent in 2009/10 to 3.2 percent 2010/11. On the strength of high oil prices, the
current account surplus improved to 6 percent of GDP in 2010/11.
Building upon their success in reducing inflation over the last few years, the authorities
were able to contain inflation in the aftermath of the subsidy reform. The authorities’
monetary policy implementation brought down annual average inflation from 25.4 percent
in 2008/09 to 12.4 percent in 2010/11. Despite the very large domestic energy price
increases in December, inflation remained relatively contained. Numerous administrative
measures, such as price monitoring and enforcement of price transparency and the
accumulation of inventories of strategic foodstuffs, helped slow down the pass-through of
higher energy prices into other prices. While there was an almost doubling of the central
bank’s claims on banks (related mainly to the financing of subsidized housing), the central
bank sterilized this increase by selling foreign exchange. As a result, consumer price
inflation only increased from 10.1 percent in December to 14.2 percent at end-May 2011,
with the average monthly inflation rate for January–May reaching only 2¼ percent.
The fiscal surplus improved in 2010/11 to 1.7 percent of GDP, reflecting prudent
spending policies. In particular, the authorities reduced capital spending, and saved some
of the extra revenue from increased oil prices in the newly established National
Development Fund.
Click here to view full report
Banking
In 1979, the government nationalized all private banks. A banking system was
subsequently created where, in accordance with Islamic law, interest on loans was
replaced with handling fees. This system went into effect in the mid-1980s. The Central
bank, the Bank Markazi, issues currency and oversees all state and private banks. The
government began to privatize the banking sector in 2001 when licenses were issued to
two new privately owned banks.
There are a few foreign bank branches and representative offices in the country who are
allowed to undertake administrative and coordination activities but are not permitted to
open customer accounts inside Iran, receive deposits or extend normative facilities.
In 2010 there were major concerns that the Iranian banking system is in crisis, weighed
down by a proliferation of non-performing loans.
Stock Exchange
The Tehran Stock Exchange opened in February 1967. Most early listings were
Government bonds and certain State-baked certificates.
The Tehran Stock Exchange has evolved to where individual and institutional investor can
trade securities in over 420 companies.
Background:
Known as Persia until 1935, Iran became an
Islamic republic in 1979 after the ruling
monarchy was overthrown and Shah
Mohammad Reza PAHLAVI was forced into
exile. Conservative clerical forces established a
theocratic system of government with ultimate
political authority vested in a learned religious
scholar referred to commonly as the Supreme
Leader who, according to the constitution, is
accountable only to the Assembly of Experts - a
popularly elected 86-member body of clerics.
US-Iranian relations have been strained since a
group of Iranian students seized the US
Embassy in Tehran on 4 November 1979 and
held it until 20 January 1981. During 1980-88,
Iran fought a bloody, indecisive war with Iraq
that eventually expanded into the Persian Gulf
and led to clashes between US Navy and
Iranian military forces between 1987 and 1988.
Iran has been designated a state sponsor of
terrorism for its activities in Lebanon and
elsewhere in the world and remains subject to
US, UN, and EU economic sanctions and export
controls because of its continued involvement
in terrorism and its nuclear weapons ambitions.
Following the election of reformer Hojjat
ol-Eslam Mohammad KHATAMI as president in
1997 and a reformist Majles (legislature) in
2000, a campaign to foster political reform in
response to popular dissatisfaction was
initiated. The movement floundered as
conservative politicians, through the control of
unelected institutions, prevented reform
measures from being enacted and increased
repressive measures. Starting with nationwide
municipal elections in 2003 and continuing
through Majles elections in 2004, conservatives
reestablished control over Iran's elected
government institutions, which culminated with
the August 2005 inauguration of hardliner
Mahmud AHMADI-NEJAD as president. His
controversial reelection in June 2009 sparked
nationwide protests over allegations of electoral
fraud. The UN Security Council has passed a
number of resolutions (1696 in July 2006, 1737
in December 2006, 1747 in March 2007, 1803
in March 2008, and 1835 in September 2008
and 1929 in June 2010) calling for Iran to
suspend its uranium enrichment and
reprocessing activities and comply with its IAEA
obligations and responsibilities. Resolutions
1737, 1477, 1803 and 1929 subject a number
of Iranian individuals and entities involved in
Iran's nuclear and ballistic missile programs to
sanctions. Additionally, several Iranian entities
are subject to US sanctions under Executive
Order 13382 designations for proliferation
activities and EO 13224 designations for
support of terrorism. In mid-February 2011,
opposition activists conducted the largest
antiregime rallies since December 2009,
spurred by the success of uprisings in Tunisia
and Egypt. Protester turnout probably was at
most tens of thousands and security forces
were deployed to disperse protesters.
Additional protests in March 2011 failed to elicit
significant participation largely because of the
robust security response, although discontent
still smolders.Government type:
theocratic republic
Capital:
name: Tehran
time difference: UTC+3.5
Independence:
1 April 1979 (Islamic Republic of Iran
proclaimed)
National holiday:
Republic Day, 1 April (1979)
note: additional holidays celebrated widely in
Iran include Revolution Day, 11 February
(1979); Noruz (New Year's Day), 21 March;
Constitutional
Monarchy Day, 5 August (1925); and various
Islamic observances that change in accordance
with the lunar-based hejira calendar
Constitution:
2-3 December 1979; revised 1989 to expand
powers of the presidency and eliminate the
prime ministership
Legal system:
the Constitution codifies Islamic principles of
government
Suffrage:
15 years of age; universal
Government:
Chief of state: Supreme Leader Ali
Hoseini-KHAMENEI (since 4 June 1989)
head of government: President Mahmud
AHMADI-NEJAD (since 3 August 2005); First
Vice President Mohammad Reza RAHIMI (since
13 September 2009)
cabinet: Council of Ministers selected by the
president with legislative approval; the Supreme
Leader has some control over appointments to
the more sensitive ministries
note: also considered part of the Executive
branch of government are three oversight
bodies: 1) Assembly of Experts
(Majles-Khebregan), a popularly elected body
charged with determining the succession of the
Supreme Leader, reviewing his performance,
and deposing him if deemed necessary; 2)
Expediency Council or the Council for the
Discernment of Expediency
(Majma-e-Tashkhis-e-Maslahat-e-Nezam)
exerts supervisory authority over the executive,
judicial, and legislative branches and resolves
legislative issues on which the Majles and the
Council of Guardians disagree and since 1989
has been used to advise national religious
leaders on matters of national policy; in 2005
the Council's powers were expanded to act as a
supervisory body for the government; 3)
Council of Guardians of the Constitution or
Council of Guardians or Guardians Council
(Shora-ye Negban-e Qanon-e Asassi)
determines whether proposed legislation is both
constitutional and faithful to Islamic law, vets
candidates in popular elections for suitability,
and supervises national elections
elections: Supreme Leader appointed for life by
the Assembly of Experts; president elected by
popular vote for a four-year term (eligible for a
second term and third nonconsecutive term);
election last held on 12 June 2009;(next
presidential election slated for June 2013)
election results: Mahmud AHMADI-NEJAD
reelected president; percent of vote - Mahmud
AHMADI-NEJAD 62.6%, Mir-Hosein
MUSAVI-Khamenei 33.8%, other 3.6%; voter
turnout 85% (according to official figures
published by the government)
For names of current Ministers, click here.
Disputes - international:
Iran protests Afghanistan's limiting flow of
dammed tributaries to the Helmand River in
periods of drought; Iraq's lack of a maritime
boundary with Iran prompts jurisdiction disputes
beyond the mouth of the Shatt al Arab in the
Persian Gulf; Iran and UAE dispute Tunb
Islands and Abu Musa Island, which are
occupied by Iran; Iran stands alone among
littoral states in insisting upon a division of the
Caspian Sea into five equal sectors
All the information on this page sourced from
the CIA World Factbook, the US Commercial
Service and relevant FATF M.E.R.
Known as Persia until 1935, Iran became an
Islamic republic in 1979 after the ruling
monarchy was overthrown and Shah
Mohammad Reza PAHLAVI was forced into
exile. Conservative clerical forces established a
theocratic system of government with ultimate
political authority vested in a learned religious
scholar referred to commonly as the Supreme
Leader who, according to the constitution, is
accountable only to the Assembly of Experts - a
popularly elected 86-member body of clerics.
US-Iranian relations have been strained since a
group of Iranian students seized the US
Embassy in Tehran on 4 November 1979 and
held it until 20 January 1981. During 1980-88,
Iran fought a bloody, indecisive war with Iraq
that eventually expanded into the Persian Gulf
and led to clashes between US Navy and
Iranian military forces between 1987 and 1988.
Iran has been designated a state sponsor of
terrorism for its activities in Lebanon and
elsewhere in the world and remains subject to
US, UN, and EU economic sanctions and export
controls because of its continued involvement
in terrorism and its nuclear weapons ambitions.
Following the election of reformer Hojjat
ol-Eslam Mohammad KHATAMI as president in
1997 and a reformist Majles (legislature) in
2000, a campaign to foster political reform in
response to popular dissatisfaction was
initiated. The movement floundered as
conservative politicians, through the control of
unelected institutions, prevented reform
measures from being enacted and increased
repressive measures. Starting with nationwide
municipal elections in 2003 and continuing
through Majles elections in 2004, conservatives
reestablished control over Iran's elected
government institutions, which culminated with
the August 2005 inauguration of hardliner
Mahmud AHMADI-NEJAD as president. His
controversial reelection in June 2009 sparked
nationwide protests over allegations of electoral
fraud. The UN Security Council has passed a
number of resolutions (1696 in July 2006, 1737
in December 2006, 1747 in March 2007, 1803
in March 2008, and 1835 in September 2008
and 1929 in June 2010) calling for Iran to
suspend its uranium enrichment and
reprocessing activities and comply with its IAEA
obligations and responsibilities. Resolutions
1737, 1477, 1803 and 1929 subject a number
of Iranian individuals and entities involved in
Iran's nuclear and ballistic missile programs to
sanctions. Additionally, several Iranian entities
are subject to US sanctions under Executive
Order 13382 designations for proliferation
activities and EO 13224 designations for
support of terrorism. In mid-February 2011,
opposition activists conducted the largest
antiregime rallies since December 2009,
spurred by the success of uprisings in Tunisia
and Egypt. Protester turnout probably was at
most tens of thousands and security forces
were deployed to disperse protesters.
Additional protests in March 2011 failed to elicit
significant participation largely because of the
robust security response, although discontent
still smolders.Government type:
theocratic republic
Capital:
name: Tehran
time difference: UTC+3.5
Independence:
1 April 1979 (Islamic Republic of Iran
proclaimed)
National holiday:
Republic Day, 1 April (1979)
note: additional holidays celebrated widely in
Iran include Revolution Day, 11 February
(1979); Noruz (New Year's Day), 21 March;
Constitutional
Monarchy Day, 5 August (1925); and various
Islamic observances that change in accordance
with the lunar-based hejira calendar
Constitution:
2-3 December 1979; revised 1989 to expand
powers of the presidency and eliminate the
prime ministership
Legal system:
the Constitution codifies Islamic principles of
government
Suffrage:
15 years of age; universal
Government:
Chief of state: Supreme Leader Ali
Hoseini-KHAMENEI (since 4 June 1989)
head of government: President Mahmud
AHMADI-NEJAD (since 3 August 2005); First
Vice President Mohammad Reza RAHIMI (since
13 September 2009)
cabinet: Council of Ministers selected by the
president with legislative approval; the Supreme
Leader has some control over appointments to
the more sensitive ministries
note: also considered part of the Executive
branch of government are three oversight
bodies: 1) Assembly of Experts
(Majles-Khebregan), a popularly elected body
charged with determining the succession of the
Supreme Leader, reviewing his performance,
and deposing him if deemed necessary; 2)
Expediency Council or the Council for the
Discernment of Expediency
(Majma-e-Tashkhis-e-Maslahat-e-Nezam)
exerts supervisory authority over the executive,
judicial, and legislative branches and resolves
legislative issues on which the Majles and the
Council of Guardians disagree and since 1989
has been used to advise national religious
leaders on matters of national policy; in 2005
the Council's powers were expanded to act as a
supervisory body for the government; 3)
Council of Guardians of the Constitution or
Council of Guardians or Guardians Council
(Shora-ye Negban-e Qanon-e Asassi)
determines whether proposed legislation is both
constitutional and faithful to Islamic law, vets
candidates in popular elections for suitability,
and supervises national elections
elections: Supreme Leader appointed for life by
the Assembly of Experts; president elected by
popular vote for a four-year term (eligible for a
second term and third nonconsecutive term);
election last held on 12 June 2009;(next
presidential election slated for June 2013)
election results: Mahmud AHMADI-NEJAD
reelected president; percent of vote - Mahmud
AHMADI-NEJAD 62.6%, Mir-Hosein
MUSAVI-Khamenei 33.8%, other 3.6%; voter
turnout 85% (according to official figures
published by the government)
For names of current Ministers, click here.
Disputes - international:
Iran protests Afghanistan's limiting flow of
dammed tributaries to the Helmand River in
periods of drought; Iraq's lack of a maritime
boundary with Iran prompts jurisdiction disputes
beyond the mouth of the Shatt al Arab in the
Persian Gulf; Iran and UAE dispute Tunb
Islands and Abu Musa Island, which are
occupied by Iran; Iran stands alone among
littoral states in insisting upon a division of the
Caspian Sea into five equal sectors
All the information on this page sourced from
the CIA World Factbook, the US Commercial
Service and relevant FATF M.E.R.
| KnowYourCountry |
| Last Updated: 6 September 2011 |
|