IMF: Iran Economy Looking Up, Independent Analysts Raise Doubts
17 Jun 2011 01:45
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Iran Daylight Time (IRDT), GMT+4:301:45 a.m., 27 Khordad/June 17 As reported by the Tehran Times, the new International Monetary Fund (IMF) statement on the Iranian economy, based on a mission that took place between May 28 and June 9, commends the regime's efforts in several areas. According to the IMF's statement,
Real GDP growth recovered to an estimated 3.5 percent in 2009/10 despite the drop in oil prices, reflecting strong non-oil growth and an exceptional agriculture crop. The positive growth momentum continued in 2010/11. The authorities' monetary policy successfully brought down annual average inflation from 25.4 percent in 2008/09 to 12.4 percent in 2010/11. Gross external reserves also remain comfortable with improved prospects for the external sector on the back of higher oil prices.
The mission commended the authorities for the early success in the implementation of their ambitious subsidy reform program. The increases in prices of energy products, public transport, wheat, and bread adopted on December 19, 2010, are estimated to have removed close to US$60 billion (about 15 percent of GDP) in annual implicit subsidies to products. At the same time, the redistribution of the revenues arising from the price increases to households as cash transfers has been effective in reducing inequalities, improving living standards, and supporting domestic demand in the economy. The energy price increases are already leading to a decline in excessive domestic energy consumption and related energy waste. While the subsidy reform is expected to result in a transitory slowdown in economic growth and temporary increase in the inflation rate, it should considerably improve Iran's medium term outlook by rationalizing domestic energy use, increasing export revenues, strengthening overall competitiveness, and bringing economic activity in Iran closer to its full potential.
Press TV, the English-language subsidiary of Islamic Republic of Iran Broadcasting, the state television and radio network, reported how a leading economic official characterized the new statement as a reversal of previous reports "contrary to factual evidence": in its April report on the global economy, the IMF had assessed Iranian growth in 2009 at 0.1 percent, in 2010 at 1.0 percent, and projected zero growth in 2011. The change in the calculation apparently comes from the IMF's decision to accept the figures provided by the Ahmadinejad administration. By Press TV's account,
Iran's Deputy Economy Minister Mohammad Reza Farzin says the International Monetary Fund (IMF) has corrected its report about the country's economic status.
After Iran criticized IMF's reports regarding the country's economic indexes and situation, "this institution sent a group of its experts to Iran to review the situation," Farzin said on Thursday.
In its previous report, the IMF had said that Iran's economic growth in the year 2011 would fall to zero percent due to sanctions and high inflation.
Farzin added that after expert studies, the IMF mission deemed their earlier reports contrary to factual evidence regarding the Iranian economy and applauded the country's notable successes in implementing the subsidy reform plan.
Some independent economists, however, see certain of the IMF's new conclusions as unsound. According to a report by Radio Free Europe/Radio Liberty's Robert Tait,
Mehrdad Emadi, an Iranian economic specialist with the London-based Data Matrix Systems, says the fund is wrong about Iran's inflation rate, which he believes is closer to 30 percent. The discrepancy, Emadi believes, is because the fund's economists have had access only to selective data provided by Iranian officials.
"The data is entirely government data. They don't make any references to commercial sources," Emadi says. "Also, the data is not publicly available to even internal organizations -- organs like the parliament's budget commission. That does not necessarily mean the data is tarnished or not reliable. It just means that the data is not easily verifiable. Regardless of whether this was the U.S. government, the Iranian government, or the British government, if the data is not verifiable I feel uncomfortable about [these conclusions and analyses]."
At the same time, the IMF may have taken the subsidy reform plan out of its proper local context, Emadi argues, by failing to identify the takeover of the Iranian economy by companies linked to the powerful Islamic Revolutionary Guards Corps (IRGC).
"The IMF institutionally, they really like the idea of markets being pushed towards real prices, taking out distortions, which subsidies are. On the surface, Iran is trying to do that," he says. "But it's really not, because Iran is moving from a model of general subsidies to a model of income support for firms and organizations which are going to be now connected to us [the government] -- i.e., through a Revolutionary Guard network of firms, which are going to be getting everything at preferential rates. The IMF is looking at the picture it is getting and is ignoring what I would call the widespread creeping of Revolutionary Guard firms into the economy at every level."
Jamshid Assadi, an Iranian economist at Dijon's ESC Groupe Business School, says that the nation's Central Bank is running short of funds and that the compensatory cash handouts will probably be trimmed or entirely eliminated for many people. In Assadi's view, even the IMF's new estimate of 3.5 percent GDP growth rate is unimpressive in comparison to growth in other countries in the region, such as Turkey.
In the same April global economic report that estimated Iran's 2010 growth at 1.0 percent, Turkey's growth for that year was estimated at 8.2 percent. As for other major countries in the region, Egyptian growth, for example, was estimated at 5.1 percent, Syrian growth at 3.2 percent, and Saudi Arabian growth at 3.7 percent. The respective projections for 2011 were Turkey -- 4.6 percent, Egypt -- 1.0 percent, Syria -- 3.0 percent, and Saudi Arabia -- 7.5 percent.
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