The Growth Pattern of Iran's Economy in the First Five Year Development Plan (1989- 1994)

Abstract

The effective factors on the economic growth of Iran during the first 5-year development plan are studied. The main characteristics of this period are that the first development plan began after the end of war during which some of the unused capacities of the war period were utilized. While the budget deficit was continued in this period the government also pursued policies such as devaluation of Rial, borrowing from aboard, liberalization and privatization to reconstruct the economy and promote the export. In this paper we consider growth factors as consumption and investment of domestic demand, promotion of export, Import substitution for consumer, investment and capital goods and also domestic demand for intermediate goods as a proxy for change in technology of production. It is shown that despite intensive devaluation of national money (Rial) in this period, due to weak production infrastructure and technology the Iran's economy was unable to efficiently take advantage of foreign trade for its growth. The impact of foreign trade i.e. the total impact of export promotion and import substitution in his period is almost equal to zero; and the growth of Iran's economy dependent on the domestic demand.