Iran’s Supreme Leader sets growth target at 8%
Iran’s new development plan, unveiled by Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei on Tuesday, envisages sustainable growth of eight percent over the next five years.
The country foresees an economic growth of 2.5% this year as it absorbs the shock of oil price declines and US-led sanctions. The Middle East’s second largest economy rebounded from two years of recession in 2014 and logged a growth rate of 1.45%, according to the International Monetary Fund. Inflation has fallen from 40% to 17% in less than two years.
The Leader’s blueprint for the years 2016-2021, communicated to President Hassan Rouhani and heads of the judiciary and legislature, also calls for economic diplomacy, notably in Southeast Asia, to “revive foreign investment and enter global markets”.
Iran’s economy contracted between 2012 and 2013 at a rate of 6.8% and 1.9% which saw the national currency lose two-thirds of its value. But the country is functioning on the strength of a large economy with its massive small-size businesses which provide a cushion against a plethora of sanctions.
According to the IMF, Iran generated a GDP of $406 billion in 2014 which landed it second among 30 economies in the Middle East, North Africa and the Central Asia.
US-led sanctions are still in place but Iran’s economy chugs along. Ayatollah Khamenei’s recipe to neuter the sanctions and stimulate growth is to cultivate an “economy of resistance”. It calls for establishing a knowledge-based economy relying on domestic capacities and cutting dependence on oil revenues which have emerged as the principal tool of Western powers to pressure Iran.
The government, meanwhile, is awaiting the outcome of nuclear talks between Iran and the P5+1 group of countries. If the negotiations lead to a final solution, Iran will see a notable rise in foreign investment. Government says it has braced itself for the worst scenario where the country would retain its modest economic uptick even if the negotiations collapsed.
This year, the government has to ride out a new wave of oil price fluctuations and a budget deficit. It has worked out a budget plan which takes the burden off the depleting oil revenues and shifts the weight to non-oil proceeds to a great extent, unprecedented in the recent history.
Under the sanctions, the Iranian government has halved the state budget’s dependence on petrodollars. Government spokesman Mohammad-Baqer Nobakht has said the administration was taking in stride an 80% drop in oil revenues from record levels to around $24 billion.
Ayatollah Khamenei’s plan also stresses the need for protecting the country’s IT infrastructure following a series of sabotage attacks which Iran has denounced as “cyber terrorism”. The most recent report of a cyber invasion came in May when the head of the Iranian Cyber Police said the country had foiled a hacking attack on its Ministry of Petroleum, which originated from the US.