Domestic and international experts draw a favorable economic outlook for Iran, thanks to higher oil prices.
The somewhat strong momentum of private sector investment also makes growth prospects for 2005 look good. It is predicted that the Gross Domestic Product (GDP) growth rate would remain around 6.5 percent this year and next.
The government says it plans to accelerate and intensify structural reforms under the forthcoming Fourth Five-Year Economic Development Plan (2005-2010), which would pave the way for sustainable high rates of growth and employment.
Unemployment rate has declined and gross international reserves have grown to stand at more than six months of cost for import of cargos and services.
Foreign account surplus however has fallen and inflation has remained higher at 15 percent in the period compared to the year before.
There is need to take necessary steps to scrap the remaining forex restrictions in current account balance exchanges.
Officials should also increase foreign reserve account assets when oil prices are high on global markets.
Against all Odds
Based on official figures, GDP last year grew by 6.7 percent (March 2003-04) compared to the previous year and reached nearly 379,003 billion rials. The per capita production rose by 4.9 percent during the same period, amounting to 5,676 rials.
Regardless of political and military crises that gripped several nations, above all the fall of Saddam Hossein in Iraq and the Taliban regime in Afghanistan following joint US-British strikes, further fueling political hostilities in the volatile Middle East region, and despite numerous economic shortfalls such as poor infrastructures, low productivity, lack of investments... the government has managed to nudge the economy out of prolonged stagnation.
Reliable statistics attest that economic indices have improved since the reformist government came to power seven years ago--though in some sectors progress has been slower than others.
A case in point is a 6.7 percent increase in economic growth rate including oil revenues and 6.5 percent without oil as forecast by the Third Five-Year Economic Development Plan (2000-2005), notwithstanding higher financial reserves due to a record rise in global oil prices, improved economic structures, rapid industrial development, 12.1 percent investment growth, state drive to privatize the economy, unification of forex rates, 3.1 productivity growth rate, etc.
The economy still suffers from swelling prices. The price index in urban areas last year that went up by 15.6 percent, partly related to:
-An average annual liquidity growth of over 28.5 percent during 2001-2003
-Increase in prices of basic commodities and services stipulated in the third plan excluding oil and gas derivatives
-Unhelpful and harmful economic policies such as undue legal restrictions imposed on importers and high tariffs under the pretext of boosting domestic production
The outcome has been runaway inflation, imposing further financial burden on lower-strata groups.
Controlling Prices
Through tough control mechanism and anti-inflationary laws, the government has tried to put a brake on rising prices to some extent. Other measures include:
-Triggering faster economic growth; the economy made a record growth of near 6.7 percent last year as against 5.1, 5.4 and 6.5 percents registered for the previous years respectively;
-Curbing liquidity growth; the volume of liquidity increased by 26.1 percent compared to 30.1 percent recorded for the previous year, thanks to a decision by Iran Telecommunications Company to sell SIM cards on a pre-sale basis in March. As a result, the ministry collected almost 24,640 billion rials worth of private assets that otherwise would have remained idle; a process that caused the liquidity rate to decline by 5 percent.
-Improving productivity and regulating the market through aggregated reserves. The savings were successfully used to intervene in the market when the value of certain selected items surpassed their price range.

Pro-Export Gov't
Non-oil exports last year registered a 28 percent growth compared to its previous year, reaching $6,755 million. The figure shot up to $13,170 million inclusive of services exports.
Unification of multiple forex rates, export subsidies, awards for exemplary exporters and tax exemptions were among state supportive policies to boost Iran's overseas sales. Another encouraging initiative was giving exporters wider authority to manage their forex earnings.
Nevertheless, high production costs continue to enfeeble the position of Iranian manufacturers and exporters in reaching out to global markets by taking away their competitive abilities.
Other reform-oriented policies included enforcement of development-oriented laws such as the one on comprehensive social security system, endorsing electronic commerce, allowing establishment of private banks and insurance firms as well as foreign bank branches in free trade zones, devising protective policies to boost transactions in Tehran Stock Exchange market, setting up several regional and commodity bourses, creation of a non-banking financial system to curtail banking system's monopoly and providing security to investors. Today, few can deny that a new life has been breathed into the Iranian economy and that future prospects could remain hopeful should the next administration continue with efforts to open up and privatize the economy.
Strategies
The economy continues to suffer from slow privatization, a heavy subsidy system on energy and production sectors, a sprawling bureaucracy and excessive state monopoly, unrestrained smuggling and existence of unofficial markets as well as high liquidity and inflation.
A few strategies are often proposed to improve the situation which include:
-Regulating supply and demand market
-Encouraging economic competitiveness through broader interaction with global markets and restructuring production, monetary and financial mechanisms
-Reducing state interventions in key economic undertakings
-Attraction of investments through an active foreign policy and optimizing economic opportunities at regional and international levels
-Gaining access to state-of-the-art technology and localizing them as a driving force behind sustainable economic development
-Reducing the country's investment risk rate and absorbing more cash from private resources to fund development schemes
-Pushing harder for political and economic reforms, strengthening civil entities, stabilizing laws, improving managerial and administrative systems; all aimed at increasing economic efficiency
-Improving statistical performance of responsible organizations to authenticate economic data

Cautious
Although low levels of public debt, a healthy trade surplus and rising government expenditure complete the benign picture for the Iranian economy, however despite the encouraging signs, analysts remain highly cautious about Iran's future prospects.
One reason for this warning is that Iran's fortunes remain closely tied to oil, despite efforts to diversify the economy.
A second difficulty is that the Iranian economy is dominated by a sprawling, inefficient state sector, with private enterprise largely limited to small trading and service businesses.
Opportunities for foreign trade, meanwhile, are restricted by sanctions imposed nearly nine years ago by the US.
With unemployment officially estimated at 16 percent of the workforce, but thought in reality to be far higher, Iran needs to create about 800,000 new jobs a year. This puts the country under pressure to at least maintain, and preferably surpass, its current growth rate.