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Iran Economy
 
 
 

General

Iran's economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and small-scale private trading and service ventures. Its economic infrastructure has been improving steadily over the past two decades but continues to be affected by inflation and unemployment. In the early 21st century the service sector contributed the largest percentage of the GDP, followed by industry (mining and manufacturing) and agriculture. In 2006, about 45% of the government's budget came from oil and natural gas revenues, and 31% came from taxes and fees. Government spending contributed to an average annual inflation rate of 14% in the period 2000-2004. Iran has earned US$70 billion in foreign exchange reserves mostly (80%) from crude oil exports in 2007. Iran's official annual growth rate is at 6%. Because of these figures and the country's diversified but small industrial base, the United Nations classifies Iran's economy as semi-developed.

The services sector has seen the greatest long-term growth in terms of its share of GDP, but the sector remains volatile. State investment has boosted agriculture with the liberalisation of production and the improvement of packaging and marketing helping to develop new export markets. Thanks to the construction of many dams throughout the country in recent years, large-scale irrigation schemes, and the wider production of export-based agricultural items like dates, flowers and pistachios, produced the fastest economic growth of any sector in Iran over much of the 1990s. Iran's major commercial partners are China, Germany, South Korea, France, Japan, Russia and Italy.

Close to 1.8% of national employment is generated in the tourism sector which is slated to increase to 10% in the next five years. About 1,659,000 foreign tourists visited Iran in 2004; most came from Asian countries, including the republics of Central Asia, while a small share came from the countries of the European Union and North America. However, in the early 2000s the industry still faced serious limitations in infrastructure, communications, regulatory norms and personnel training. Iran currently ranks 89th in tourist income, but is rated among the 10 most touristic countries in the world. Weak advertising, unstable regional conditions, a poor public image in some parts of the world and the absence of efficient planning schemes in the tourism sector have all hindered the growth of tourism.

Since the late 1990s, Iran has increased its economic cooperation with other developing countries, including Syria, India, Cuba, Venezuela and South Africa. Iran is expanding its trade ties with Turkey and Pakistan, and shares with its partners the common goal of creating a single economic market in West and Central Asia, called ECO. Iran expects to attract billions of dollars of foreign investment by creating a more favourable investment climate, such as reduced restrictions and duties on imports, and free-trade zones in Chabahar, Qeshm and Kish Island.

The administration continues to follow the market reform plans of the previous one and indicated that it will diversify Iran's oil-reliant economy. It is attempting to do this by investing revenues in areas like automobile manufacturing, aerospace industries, consumer electronics, petrochemicals and nuclear technology. Iran has also developed a biotechnology, nanotechnology and pharmaceuticals industry. The strong oil market since 1996 helped ease financial pressures on Iran and allowed for Tehran's timely debt service payments. Iranian budget deficits have been a chronic problem, mostly due to large-scale state subsidies, that include foodstuffs and especially gasoline, totaling more than US$84 billion in 2008 for the energy sector alone.

Overview

Economy - overview
Iran's economy is marked by an inefficient state sector, reliance on the oil sector (which provides 85% of government revenues), and statist policies that create major distortions throughout. Most economic activity is controlled by the state. Private sector activity is typically small-scale workshops, farming, and services. President Mahmud AHMADI-NEJAD failed to make any notable progress in fulfilling the goals of the nation's latest five-year plan. A combination of price controls and subsidies, particularly on food and energy, continue to weigh down the economy, and administrative controls, widespread corruption, and other rigidities undermine the potential for private-sector-led growth. As a result of these inefficiencies, significant informal market activity flourishes and shortages are common. High oil prices in recent years have enabled Iran to amass nearly $70 billion in foreign exchange reserves. Yet this increased revenue has not eased economic hardships, which include double-digit unemployment andinflation. The economy has seen only moderate growth. Iran's educated population, economic inefficiency and insufficient investment - both foreign and domestic - have prompted an increasing number of Iranians to seek employment overseas, resulting in significant 'brain drain'.



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