Abstract
This 2004 Article IV Consultation highlights that during the first four years of the Third Five-Year Development Plan (2000/01–2003/04), Iran’s real GDP grew by 5.6 percent on average. The external current account was in surplus, external debt was reduced to a very low level, international reserves increased, and the unemployment rate declined. Real GDP grew by 6.7 percent in 2003/04, with strong contribution from both the oil and non-oil sectors. The unemployment rate declined to 11.2 percent from 14.1 percent in 2000/01.
This statement contains updated information on recent economic developments in Iran that have become available since the Staff Report was circulated to the Executive Board on August 23, 2004. This information does not change the thrust of the staff appraisal.
1. Since the Staff Report was issued, oil prices have continued to rise. Iran’s average oil export price for fiscal year 2004/05 is now estimated at $36 per barrel, in line with the August 2004 World Economic Outlook. The impact of the stronger oil market conditions is reflected in the sensitivity analysis shown in Figure 8 of the Staff Report. The authorities have informed staff that the windfall gains from higher-than-budgeted oil revenue (estimated at $5 billion, or 2.5 percent of GDP) will be deposited in the Oil Stabilization Fund.
2. CPI inflation was 14.4 percent in the 12-month period ending July 2004. Preliminary estimates for the 12-month period ending June 2004 point to an increase in broad money (M2) of 29 percent and in credit to the private sector of 42 percent. The monetary authorities have already issued Central Bank Participation Papers to mop up excess liquidity in an amount of Rls 5 trillion (3 percent of base money) on a net basis.
3. The draft law of the Fourth Five-Year Development Plan (2005–09), which has been approved by the outgoing parliament, was re-submitted to the newly elected parliament after the Guardian Council had raised a number of issues, one of them relating to the conformity of the proposed privatization of public banks with the provisions of the Iranian Constitution. This and other issues are being considered in various committees, but the authorities do not expect major changes in the plan’s reform agenda.