Economic Policies in the UK and Iran Between 2011 and 2015, Research Paper Example

The performance of Iran and the UK economies between 2012 and 2015 varied considerably as a result of differences in economic policies. While these policies can be compared and contrasted, it is important to consider the fact that the countries in question have considerably different economic structures as well as different economic and political environments at the time.

Most of Iran’s economic policies in the period between 2011 and 2013 were influenced by conditions extending from 2006. This period was characterized by the global oil prices rising above £67 per barrel. Revenue from oil soared to £464 billion but was characterized by stagflation. As a result of the high oil revenues, expenditure of national resources led to a 2.2% economic growth rate. Inflation on the other hand rose from 20.7% in 2011 to above 40% in 2013 (Mason). This was a result of economic policy adopted by the ruling administration at the time.

Owing to the high oil revenues, the government made its budget and expenditure oil-dependent. This was as a result of the Central Bank purchasing most of the oil revenues and the Rials that were generated were directed to government expenditures. The exchange rate for the five year period before 2011 had been fixed at 10,000 Rials per dollar as a result of the Central Bank liquidating part of its dollar reserves in the market (Hossain). With Iran’s the inflation rate exceeding the global average by 16%, Iranian good gradually became uncompetitive. This led to the closedown of numerous industries unemployment soared.

Between 2011 and 2012, the Iranian market experienced economic turmoil as a result of fluctuations of the foreign exchange rates, having tripled by 2012, and housing prices increasing by 80% in the same period. The country’s ruling administration then focused on bringing the economy back to macroeconomic stability targeting a less than 10% inflation rate. Between 2012 and 2015, the country increased non-oil exports. The country’s balance of trade has also been improved, as it seeks to become a net exporter. The country has also established free trade and special economic zones.

The United Kingdom has implemented different economic policies in the period between 2011 and 2015. For the period before 2010, the UK had experienced a recession that was characteristic of most developed economies in the 2008 Global recession. Real GDP decreased to an all-time low. By 2008 the unemployment rate began to rise above the 6% threshold and crossed the 8% threshold by 2009 (Crafts). However, between 2010 and 2011, fiscal policy was loosened, temporarily lifting the economy to recovery. In 2012, the European recession also affected UK’s economy, sliding back to recession. However, this was also due to a number of other contributing factors. During this same time unemployment begun to drop.

Austerity measures were employed by government in a bid to control the economy out of the recession. However, this led to a reduction in investor confidence. As the damage of a consecutive double dip recession started to take its toll, real income began falling. This situation was compounded by perpetual bank lending weakness (Crafts). The onset of 2013 saw the UK record net positive economic growth, considerably outperforming most of Europe’s economies. The unemployment rate dipped to 6% by the first quarter of 2014.

The UK and Iran recorded different economic performance in the period between 2011 and 2015. These differences were largely due to different economic and financial environment condition. While Iran faced the effects of an increase in global oil prices, The UK was faced by the effects of the 2008 recession. This recession played an important role in the increase in fuel prices, which resulted in a heavily oil-dependent Iranian government budget and expenditure. A poor economic policy on international exchange rates and the Central Bank’s dollar reserve eventually led to stagflation and uncompetitive Iranian goods. However, both economies recovered after 2013.

Works Cited

Crafts, Nicholas. “UK Economic Growth since 2010: Is it as Bad as it Seems.” National Institute Economic Review 231.1 (2015): R17-“29. Print.

Hossain, Akhand A. Central banking and monetary policy in Muslim-majority countries. Cheltenham: Edward Elgar Publishing, 2015. Print.

Mason, Robert. Foreign policy in Iran and Saudi Arabia : economics and diplomacy in the Middle East. London: I.B.Tauris, 2015.

Trading Economics. Tradingeconomics.com. 24 November 2015. INternet Source. 24 November 2015.