Iranian economy : Struggle for Development
-
Upload
colin-rhodes -
Category
Documents
-
view
44 -
download
3
description
Transcript of Iranian economy : Struggle for Development
![Page 1: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/1.jpg)
IRANIAN ECONOMY: STRUGGLE FOR DEVELOPMENT
Hossein Abdoh Tabrizi
Istanbul, May 2014
![Page 2: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/2.jpg)
IRANIAN ADMINISTRATIONS SINCE THE REVOLUTION
Iran Iraq War (Imam Khomeini’s Era, Mussavi’s Premiership (1980-1988)
Rafsanjani Administration, AKA Reconstruction Government (1989-1997)
Khatami Administration, AKA Reform Government (1997-2005)
Ahmadinejad Administration, AKA Populist Government (2005-2013)
Current Administration (August 2013- )
![Page 3: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/3.jpg)
![Page 4: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/4.jpg)
o Government exposure to natural resources was volatile, though on average it had been more than 50%.
Oil Tax Other
![Page 5: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/5.jpg)
o In the last 30 years, around 75% of the Government budget was in the category of current expenditure.
current infrastructure
![Page 6: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/6.jpg)
BUDGET DEFICIT
In the last 10 years, the budget deficit increased dramatically.
![Page 7: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/7.jpg)
o As the main source of monetary policy, liquidity grew without any discipline and unrelated to economic growth.
LiquidityGrowth
![Page 8: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/8.jpg)
MONEY BASE, HIGH-POWERED MONEY
منبع: بانک مرکزی ج.ا.ا
برابر شدن پایه 10.3پولی
برابر شدن پایه 10.3پولی
![Page 9: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/9.jpg)
LIQUIDITY
منبع: بانک مرکزی ج.ا.ا
برابر شدن نقدینگی17.9 برابر شدن نقدینگی17.9
![Page 10: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/10.jpg)
o Central Bank of Iran had been highly dependent to the Government and boosted the money supply by political pressure.
0
0.1
0.2
0.3
0.4
0.5
0100000200000300000400000500000600000700000800000
1357
1359
1361
1363
1365
1367
1369
1371
1373
1375
1377
1379
1381
1383
1385
1387
1389
Money Supply
ϑ έΎμ ϣΐ δΣήΑ ϟϮ� ϪϳΎ�ϝΎϳέΩέΎϴϠϴϣ ϟϮ� ϪϳΎ�ΪηέΥήϧMoney Supply Growth
![Page 11: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/11.jpg)
o Over supply of money was from 3 sources:
1) Budget deficit and lending to Government
2) Buying foreign assets (mainly oil revenue) from Government.
3) Borrowing from banks
-200,000-100,000
0100,000200,000300,000400,000500,000600,000700,000
1357
1359
1361
1363
1365
1367
1369
1371
1373
1375
1377
1379
1381
1383
1385
1387
1389
Money Supply
ΰ� ήϣ ϧΎΑ ΟέΎΧ Ύϫ ϳ έΩκ ϟΎΧϝΎϳέΩέΎϴϠϴϣ ΰ� ήϣ ϧΎΑϪΑ ΘϟϭΩζ ΨΑ ϫΪΑκ ϟΎΧϝΎϳέΩέΎϴϠϴϣ
ΰ� ήϣ ϧΎΑϪΑΎϫ ϧΎΑ ϫΪΑϝΎϳέΩέΎϴϠϴϣ
Net Foreign Assets (B IRR)Net Governement Borrowing (B IRR) Banks Borrowing (B IRR)
![Page 12: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/12.jpg)
DECOMPOSITION OF THE BASE MONEY
منبع: بانک مرکزی ج.ا.ا
![Page 13: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/13.jpg)
oConsidering high inflation, the real rate of interest for deposits was mostly negative.
![Page 14: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/14.jpg)
Inflation is the main problem in all
sectors of Iranian economy.
0
10
20
30
40
50
60
1357
1359
1361
1363
1365
1367
1369
1371
1373
1375
1377
1379
1381
1383
1385
1387
1389
1391
Inflation
¹ Âew ¿� �| {� �Inflation
![Page 15: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/15.jpg)
CONSUMER PRICE INDEX (CPI) 1978-2014
Average Inflation Rate : 17.79 Percent Single Digit Inflation Rates: 2 Years Two Digit Inflation Rates: 34 years Inflation Rate over 20 Percent: 16 Years Inflation Rate over 30 Percent: 4 years Highest Inflation Rate: 49.4 Percent (1995) Lowest Inflation Rate: 6.9 Percent (1985)
![Page 16: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/16.jpg)
o Iran has the second highest inflation rate in the region.
![Page 17: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/17.jpg)
o Young population is a key advantage for Iran.
0
10,000
20,000
30,000
40,000
1357
1359
1361
1363
1365
1367
1369
1371
1373
1375
1377
1379
1381
1383
1385
1387
1389
Population
ϥΩήϣΖϴόϤΟήϔϧέΰϫ ϥΎϧί ΖϴόϤΟήϔϧέΰϫ Men (thousands)
Women (thousands)
![Page 18: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/18.jpg)
o More than 70% of the population are living in cities.
0
10,000
20,000
30,000
40,000
50,000
60,000
1357
1359
1361
1363
1365
1367
1369
1371
1373
1375
1377
1379
1381
1383
1385
1387
1389
Population Distribution
Urban Willage
![Page 19: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/19.jpg)
Increasing unemployment rate; too many university graduates and female job demand
![Page 20: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/20.jpg)
oReal GDP Shrinkage
02,000,0004,000,0006,000,0008,000,000
10,000,00012,000,000
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
GDP
d]ZiÉZÅd¼Ì«Ä],Ê yY{ ·ZyZ¿| Ì·Âe�{ZÌ Ì»�É ZmÉZÅd¼Ì«Ä],Ê yY{ ·ZyZ¿| Ì·Âe� �{ZÌ Ì»�
GDP, fixed pricesGDP, current prices
![Page 21: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/21.jpg)
oFollowing the sanctions, the GDP growth was negative during last 2 years. However, it is estimated to turn to positive figures in the current year.
-10
-5
0
5
10
15
20
25
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
GDP Growth
![Page 22: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/22.jpg)
o GDP per capita which indicates the welfare level, did not change significantly over the past 3 decades.
020,000,00040,000,00060,000,00080,000,000
100,000,000120,000,000140,000,000160,000,000
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
GDP per capita
d¼Ì«Ä]Ä¿Y Ê yY{ ·ZyZ¿| Ì·Âe� � �d]ZiÉZÅ d¼Ì«Ä]Ä¿Y Ê yY{ ·ZyZ¿| Ì·Âe� � �Ê §ÉZÅFixed Prices Current Prices
![Page 23: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/23.jpg)
o Iranian trade balance fluctuated significantly. During last 10 years, the exchange rate favored more imports.
-50-40-30-20-10
010203040
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Trade Balance
ΕΎϣΪΧϭϻΎ�Ε ΩέϭϢΠΣήϴϴϐΗΪλ έΩ
ΕΎϣΪΧϭϻΎ�Ε έΩΎλ ϢΠΣήϴϴϐΗΪλ έΩ
Import, % changeExport, % change
![Page 24: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/24.jpg)
OIL BOOSTED THE INCOME
The main source of Government income was from oil & gas which provided wrong signal to decision makers.
![Page 25: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/25.jpg)
Inappropriate Government PoliciesUnfriendly International Environment
LAST THREE YEARS PERFORMANCE: STAGFLATION
![Page 26: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/26.jpg)
IMPOSED EMBARGOS ON IRAN
UN’s Security Council Embargos US Embargos EU Embargos Other Countries Embargos
www.finance.i
r
![Page 27: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/27.jpg)
HARSHEST EMBARGOS IN HISTORY
Embargos on Products Embargos on Buyers Embargos on Sellers Embargos on Transport Embargos on Banks and other Financial
Institutions
www.finance.i
r
![Page 28: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/28.jpg)
EMBARGOS: BARRIERS OF CONTRACTS
Product Embargos Insurance & Transportation Embargos Bank Embargos Self Determined Embargos
www.finance.i
r
![Page 29: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/29.jpg)
PRODUCT EMBARGOS
Products of Dual-Use:1. Specific Alloys2. Petrochemical Catalysts3. Electronic Equipment's4. Hellion Gas For MRI5. Oxidized Water
www.finance.i
r
![Page 30: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/30.jpg)
BEYOND PRODUCT EMBARGOS: BANK EMBARGOS
When Payment Methods Become Problematic, So Does
Buying and Selling
www.finance.i
r
![Page 31: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/31.jpg)
INTERNATIONAL SANCTIONS
1. Approach: Mutual, Comprehensive, Long-Term, Step by Step and Coherent.
2. Context For Iran’s Nuclear Program: In Keeping with Iran’s Proclamation of It’s Commitment to Non-Military Nature of Its Nuclear Program: A Purification Program with Mutual Definition, Practical Limitations and Clarifying Arrangements Guaranteeing The Peaceful Nature of Iran’s Nuclear Program Which Would Allow Iran to Both Utilize Nuclear Energy and Maintain Its’ Obligations to NPT.
www.finance.i
r
![Page 32: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/32.jpg)
INFLATIONARY PRESSURES
Hyperinflation: 2 Years Back over 5% a Month
www.finance.ir
![Page 33: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/33.jpg)
INEVITABLE ENERGY REFORM
Cheap subsidized energy ended to high consumption rate, and low productivity
of industries
124 Million$
twice the size of current
year budget
ميليون بشکه در 700سال×100 $
ميليارد مترمکعب در 180سال×
30$ www.finance.ir
![Page 34: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/34.jpg)
How it was implemented?Coincided with sanctionsCash subsidies: poor implementationDevaluation problemCould not save the energyAdding to budget deficit
Could not improve productivity
SUBSIDY REFORM
![Page 35: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/35.jpg)
PETROL PRICES: TARGETING SUBSIDIES
![Page 36: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/36.jpg)
ENERGY PRICE VS EXCHANGE RATE
Energy price is not independent
from exchange rate
www.finance.ir
![Page 37: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/37.jpg)
ENERGY PRICE & EXCHANGE REGIME
Formal vs Market Rate of Exchange: Rent
(payment to a factor of production in excess of
its opportunity cost) & Corruption
www.finance.ir
![Page 38: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/38.jpg)
LAST THREE YEARS PERFORMANCE
![Page 39: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/39.jpg)
CRUDE OIL PRODUCTION
![Page 40: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/40.jpg)
RECESSION ESTEEMING FROM LESS GOVERNMENT EXPENDING
www.finance.ir
![Page 41: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/41.jpg)
HOUSING MARKET
A lot of new projects; 750 units every year and 30% in Tehran
www.finance.ir
![Page 42: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/42.jpg)
HOUSING MARKET: SUPPLY SIDE
Built more than the plan: inappropriate distribution;
over-built in large cities
www.finance.ir
![Page 43: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/43.jpg)
HOUSING MARKET: DEMAND SIDE
Still 1 million housing units in demand every year
due to household growth rate, high divorce rate,
and informal settlements
www.finance.ir
![Page 44: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/44.jpg)
SOCIAL HOUSING: MASKAN MEHR
Starting to build 2.2 million social housing units in 2007
Financing the project by borrowing from the central bank increasing M1 by 60%
It could not be finance like that any moreProblem at hand
![Page 45: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/45.jpg)
Maskan Mehr
![Page 46: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/46.jpg)
Reduction of labor participation rate3.5 million unemployedMajor difference of male & female unemployment ratesMajor difference of unemployment rates across age groups5 million students: the army of unemployment
Current Labor Market
![Page 47: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/47.jpg)
EXPORT
Iranian Major Non-Oil Export Items
www.finance.ir
![Page 48: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/48.jpg)
Growth Rate of Iranian Economy: Two Scenarios
![Page 49: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/49.jpg)
Inflation Rate Forecast: Two Scenarios
![Page 50: Iranian economy : Struggle for Development](https://reader030.fdocuments.in/reader030/viewer/2022012406/56813342550346895d9a3952/html5/thumbnails/50.jpg)
Oil Production Forecast: Two Scenarios