Macroeconomic position of Iran

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Iran’s macroeconomic position
Introduction
Iran’s economy has been identified as among the largest economies globally through power parity purchasing and with regard to official claims of Iran; it is likely to improve considerably by the year 2015. The economy is a transitional and mixed economy, having a great public sector together with a 50% centrally planned economy. In addition, Iran’s economy is diversified within more than forty industries which are involved directly in Tehran Stock exchange (Shorrow 2004, p.284). Great religious foundations presence makes the economy unique. The spending by the religious foundations is usually beyond 30% regarding the spending by central government. It is evident that Iran is among the economies which have sustained positive growth following the experienced worldwide financial crisis of the year 2008.
History concerning Iran’s economy
Before 1979, the economic development of Iran was rapid. Being a society which was agricultural based traditionally, by the year 1970s it had gone through significant economic modernization and industrialization (Mau 2001, p.369). This growth pace had dramatically slowed by the year 1978 when capital flight attained an amount between $30 and $40 billion prior to the revolution. The long-term objectives which have been held by the government from the revolution time have been comfortable living standards for citizens, full employment and economic independence, although by the closing stages of 20th century, Iran’s economy experienced a variety of obstacles (Olson 2000, p.274). As a result of the nationalizations within 1979 together with Iran-Iraq war outbreak, more than 80% concerning the economy of Iran ended up being controlled by the government.
Within the beginning of 21st century, the highest domestic gross product was produced by service sector, the second highest was industry (manufacturing and mining) and agriculture. The estimate of GDP was $383.3 billion in 1998, or 5,470 dollars within a year (Looney 2007, p.190). Growth patterns indicate that the held GDP in Iran has the capacity to double in the coming five years. In view of the attained figures together with the nation’s industrial base which is small although diversified, Iran was categorized by United Nations as semi-developed within the year 1998. Energy subsidies were found to be huge due to the fact that the nation has energy inefficiency. The year 2009 was marked by a situation where in research ratio to GDP amounted to 0.87% in opposition to the target of 2.5% by government. In accordance with Goldman Sachs, the country is capable of being among the largest economies worldwide within 21st century.
From the time of revolution in 1979, government spending within Iran has on average been 13% upon general affairs, 15% upon national defense, 17% upon economic matters, and 59% upon social policies (Rugman 2001, p.877). Amid economic and social affairs, expenses have averaged 12% upon roads, 5% upon mining and manufacturing, 16% upon gas, power and water, 3% upon agriculture, 20% upon social affairs, 39% upon social security, health and education. The net investment held by Iran within 2009 was recorded as 27.7% regarding GDP. From 2002 to 2006, inflation rates fluctuated about 14%. The year 2008 was marked by an income of 55% to the government from earnings from natural gas and oil, wherein 31% was attained from fees and taxes (Rugman 2001, p.878). The budget held for 2011 turned out to be $500, which was a raise from 2010 by 45%. This budget was based upon price of oil which was at $80 for every barrel. Within foreign reserves, an amount of $80 billion was recorded in the beginning of the year 2009 (Rose 2010, p.75). The nation balanced this amount with external payments through oil pricing at about $75 for every barrel. The Iranian statistics’ department held that if budgeting rules were pragmatic within the realized structure, between 30 and 35 percent concerning government expenses could be saved. Inflation has also been greatly fluctuating in Iran hence bringing about great influences upon GDP (Rose 2010, p.76).
Other indicators within Iran concerning growth together with development may be highlighted as follows. For instance, with respect to attained data from Iranian government, unemployment has experienced a rising trend and reached a level of 14.6 percent within 2010, which signifies an increase from 10.8 percent in 2008. This implies that the number of individuals having no jobs, although they possessed the ability together with the will to work, has increased. This is a sign of an economy having undesirable growth levels because desirable growth ought to be accompanied by unemployment reduction (Dreyer 2006, p.148). This therefore called for appropriate policy measures which would stimulate employment creation for individuals so as ensure that unemployment reduction was experienced.
Records show that inflation rates have been fluctuating and although they were at 10.8 percent in 2009, they increased further to 12.4 percent in 2010. For adequate growth together with development to be realized, inflation rates ought to be reasonable and therefore Iran’s government has often utilized fiscal together with monetary policies towards ensuring that desirable levels concerning inflation rates are attained (Krimly 2009, p.55). This is aimed at promoting the attainment of desirable levels concerning growth together with development.
Within the period from 1960s to 1970s, a trade balance which was favorable was realized in Iran. However, substantial imports concerning services brought about a really deficit upon current accounts. Capital inflows which were long-term in form from private supplies attained its peak within 1965; from 1968 to 1973, attained capital from alien governments highly contributed towards Iranian development (Summitt 2004, p.45). Within 1974, having a value of $17, 718 million as net surplus of trade and $10,893 million as surplus in current accounts, Iran turned out to be among the major capital importers internationally. The balance in current accounts remained in surplus yearly up to the period whereby massive civil and economic turbulences steered revolution occurrence in 1979 as well as the long, destructive war between 1980 and 1988 with Iraq.
Towards the war end, the position held by Iran as a foreign creditor ended up being eroded badly because of considerable drop in ...