Statement by the IMF Staff Representative

Iran's 2005 Article IV Consultation highlights Fourth Five-Year Development Plan (FFYDP) and the Twenty-Year Vision. The country's real GDP growth reached 5½ percent a year on average, unemployment declined, and macroeconomic indicators improved significantly, supported by favorable oil market conditions. By increasing the openness of the economy and removing major obstacles to trade and investment, the reforms introduced in the period 2000/01–2002/03 contributed significantly to this strong performance. However, the economy remains heavily dependent on oil. Demographic dynamics will also put increasing pressure on the labor market in the coming years.

Abstract

Iran's 2005 Article IV Consultation highlights Fourth Five-Year Development Plan (FFYDP) and the Twenty-Year Vision. The country's real GDP growth reached 5½ percent a year on average, unemployment declined, and macroeconomic indicators improved significantly, supported by favorable oil market conditions. By increasing the openness of the economy and removing major obstacles to trade and investment, the reforms introduced in the period 2000/01–2002/03 contributed significantly to this strong performance. However, the economy remains heavily dependent on oil. Demographic dynamics will also put increasing pressure on the labor market in the coming years.

Since the issuance of the Staff Report, the following information has become available to staff. This information does not alter the thrust of the staff appraisal.

1. CPI inflation declined from an annual rate of 11.3 percent in December 2005 to 10.7 percent in January 2006. In the twelve months ending in January 2006, the average inflation rate was in line with the staff projection for the Iranian year 2005/06 as a whole. Preliminary information for the quarter ending in December 2005 indicates that monetary aggregates continued to grow rapidly, with broad money increasing at an annual rate of 33 percent. At Rls 9,131 per U.S. dollar at the end of February 2006, the bilateral exchange rate has been stable, having depreciated by only 0.4 percent in the last two months.

2. Based on preliminary information, the balance of payments’ current account surplus is likely to exceed the staff projections for 2005/06. This reflects strong performance of non-oil exports, while the growth of imports seems to have been relatively contained.

3. Developments in the stock market have been mixed. After staging a moderate recovery from the low level reached in November 2005, trade on the Tehran Stock Exchange weakened, and the main price index dropped by 4 percent during the two months January-February 2006.

Islamic Republic of Iran: Staff Report for the 2005 Article IV Consultation
Author: International Monetary Fund