Iran, Islamic Republic Of 

Iran, Islamic Republic Of country policy

Policy established 03 October 2010

• Off cover

Country class: 6

Iran, Islamic Republic Of country facts

Atradius Dutch State Business Economic Research

Country Report last updated :  Nov 5th, 2009 
Country :  IRA N   

Political situation
int. Isolation, sanctions, unstable

Head of state
Spiritual leader Khamenei (conservative); controversial in June ’09 re-elected president Mahmoud Ahmadinejad (AN, conservative). Opposition (Mousavi) claims fraud.

Form of government
Combination of elected parliament 'majlis' (Mar’08 elections won by conservatives, 60% turnout; 90% of independents and reformists “disqualified”) and Guardian Council (to guard Islamic revolution, presided by Khamenei). In between: Expedience Council (headed by Rafsanjani) arbitrating between majlis and Guardian council and entitled to replace Khamenei.

Internal Economic Situation
Lower Real Gdp Growth Of 0.5% In 2009

General situation
Lower prices and production hamper real GDP growth, generated by private consumption. Hardly prospects for needed investments to sustain production levels: tight credit markets, sanctions and little own resources. Expansionary fiscal and monetary policy. No Progress on structural reforms. 2009 Budget expected to be in deficit again (-/- 4%, this might revitalise the failed VAT introduction discussion). Unofficial position better because of non-registered oil stabilisation fund (OSF). Macro-economic imbalances; subsidies on food and energy until introduction of a system of social welfare. Slightly depreciating IRR since (in 2002) unification of rate. No other monetary instruments than money supply used. Because of easing of international markets lower prices and therefore lower inflation (19%). Riyal overvalued, and shows a kind of “managed” depreciation against the USD (officially crawling peg). Poor functioning of largely state dominated banking system (Mellat on list for privatisation, no appetite!). Negative real interest rates.

External Economic Situation
Ca Deficit In ’09 And ‘10; Good Solvency

Main sources of foreign exchange
Exports of oil-products (85% of foreign currency income).

Main foreign markets
Japan, Germany, France, Italy.

Main expenses of foreign exchange
Imports of wheat, raw materials, spare parts, machinery.

Balance of payments 
BOP dependent on oil prices. Vulnerable to external shocks.