Elements of the Iranian Economic Assessment - Essay Example

The past decade has culminated in a relentless upsurge in Iranian gross domestic product (GDP) despite multiple sanctions and the recession. The above discloses the resilience of this economy, which has surmounted countless challenges to achieve the current progress. The Iranian Administration has maintained close control of the economy. This has permitted the administration to institute certain policies. The administration has limited the implication of globalization in a sizeable manner by sustaining price controls on critical products.

As such, the cost of vital commodities is within acceptable levels. Price controls have enabled the government to diminish expenditure owing to production hence, boosting the competitiveness of its exports. Additionally, the Iranian administration has made considerable efforts in liberalizing the mining sector culminating in the upsurge of exports from the mining sector. The mining sector entails oil, gas and zinc. The universal economy requires the above commodities constantly guarantee Iran adequate foreign reserves.

Such reserves have resulted in the financial firmness of the nation. Notably, the state limits importation and emphasizes that the local economy should primarily rely on local merchandise. As such, the nation has reduced its import culminating in an affirmative trading net. The affirmative balance has permitted Iran to avail apposite facilities and weaponry to its military. Its enormous GDP relative to its neighbours has permitted Iran to assume superpower status in the Middle East. Such a status requires a matching military.

Thus, Iran has prioritized arming its forces. This is a bullying scheme, which superpowers states require to enable them to guard their prominence (National Academy of Sciences, 2006). The Iranian economic system has founded a phenomenal service sector. This sector is vital to this economic setup since it enables it to function appositely. The service commerce entails tourism, monetary, communication and healthcare fraternities. The prosperity of the service sector owes to the Iranian government's strategic plan, which underscores the significance of spending on social policies.

Consequently, the government expends about sixty per cent of its finances on social undertakings. This enormous expenditure on societal strategies has triggered phenomenal expansion in the social fraternity. Unlike countless perceptions, which seek to reveal Iran as an imperialist nation the nation endeavours to strengthen social programs rather than channelling the majority of its resources to the defence sector. Iran has sustained defence expenditure at fifteen per cent, a level that multiple nations struggle to maintain owing to their political endeavours (Ilias, 2010).

Despite the strengths of the above economy, it is not without flaws. First, the administration has immense power to manipulate the economy. Subsequently, the prices culminate from administrative policies rather than financial forces. This has impeded international investment which is vital for any economy to succeed. The Iranian administration’s interference diminishes the gains that entrepreneurs reap since it controls pricing hence investors find operating in this economy infeasible. Regardless of the above implications, this has enabled the Iranian authority to shield the citizenry against reap-off by entrepreneurs.

Additionally, the economic set-up has facilitated minimal diversification. Therefore, the majority of its finances emanate from the petroleum fraternity. This renders the economy vulnerable to the volatility of oil prices. It is perceived that only the economies of nations that trade in oil are susceptible to oscillation in pricing. Nonetheless, nations that trade out economies also seem prone. Data reveals that shifting in the price of this commodity results in fluctuation of Iran's finances since it relies on oil trade out.

Iran depends on crude oil trades. This is a failure in the economy since it fails to create value by processing the commodity. Hence, the nation fails to optimize its revenues and open up employment. Despite the pricing management, Iran experiences double-figure inflation. This reveals that the economic setup also faces additional hitches. The hitches include transparency that is lacking. This would demand proper reporting of undertakings in the financial sector limiting embezzlement of finances.

Overall, minimal diversification represents the central hitch of this economy. Consequently, the Iranian market is exceedingly vulnerable to instability in the petroleum sector (Byman & National Defence Research Institute, 2001).