One IMF report, two newspapers, two wildly different accounts

Andrew WojtanikAndrew Wojtanik notes that the New York Times and Wall Street Journal, despite reporting on the same report by the International Monetary Fund, reach divergent conclusions on the state of Iran's economy.

By Andrew Wojtanik

The International Monetary Fund (IMF) released a statement Wednesday assessing the state of Iran’s economy after the organization’s visit to Tehran last week. Yet yesterday’s coverage of the IMF’s remarks by the Wall Street Journal and the New York Times appear so incongruous that is hard to believe the two leading American newspapers were reporting on the same statement.

The headlines alone reveal a stark contrast. Here is the banner for a Wall Street Journal piece posted online on February 12:

Wall Street Journal on Iran's economy

Now contrast this with the New York Times’ version:

New York Times on Iran's economy

Reporters are often quick to note that they do not control what headlines or photos are chosen to accompany their stories. Nonetheless, if one peruses the actual content, the differences in interpretation are even more apparent. Ian Talley’s lead for the Wall Street Journal reads: “Iran’s economy is getting a boost from the reprieve in international sanctions amid ongoing talks with Tehran over the country’s nuclear program, the International Monetary Fund said in a new assessment.”

Meanwhile, Rick Gladstone begins for the New York Times: “The International Monetary Fund issued a sobering appraisal of Iran’s economy on Wednesday, warning that years of government mismanagement aggravated by the impact of the West’s antinuclear sanctions had left the country vulnerable to anemic growth and rampant inflation that require urgent attention.”

While Talley characterizes the IMF’s account as an “optimistic outlook” for Iran’s economy, Gladstone writes that “the IMF’s tone contrasted sharply with the optimism about the economy espoused by Iran’s government.”

To be fair, both the Times and Journal articles cover both the challenges and opportunities facing Iran’s economy. Yet the suggestion that Iran’s economy may be recovering does not appear in Gladstone’s piece until half way down the page, while the opposite is true of Talley’s story for the Journal, where IMF warnings that Iran’s “positive gains…could be wiped out under renewed tensions” do not appear until paragraph 16.

So what does the IMF actually say? The statement is, as expected, caveated—making distinctions between where Iran’s economy is now, and where it could be in the future. It both commends Iran for taking necessary steps toward a responsible fiscal and monetary policy and identifies areas where significant structural problems persist.

As for whether the IMF’s appraisal is on the whole disparaging or upbeat, you can read for yourself at the IMF’s website here and offer your own judgment. Some of the highlights are copied below:

Expected 1-2% decline in GDP during FY2013-14

“The pace of contraction in economic activity is slowing. The economy has continued to shrink in the first half of 2013/14 (the Iranian calendar and fiscal years run from March 21 to March 20), and staff expects further but diminishing contraction in the second half, with real gross domestic product (GDP) declining by 1-2 percent in 2013/14. Twelve-month inflation has dropped rapidly, from about 45 percent in July 2013 to below 30 percent in December 2013. This drop reflects tighter CBI credit, the appreciation of the Rial, and global disinflation in some key staples. Inflation could end at 20-25 percent by end-2013/14.”

Projected 1-2% increase in Iran’s GDP during FY2014-15

“Prospects for 2014/15 have improved with the interim P5+1 agreement but still remain highly uncertain. Under the current external environment, staff projects economic activity to begin to stabilize in 2014/15, with real GDP growing by 1-2 percent in 2014/15. Inflation would potentially decline to 15-20 percent, excluding the impact of planned higher domestic energy prices."

“Structural weaknesses”

“Large shocks and weak macroeconomic management over the past several years have had a significant impact on macroeconomic stability and growth. A combination of shocks, associated with the implementation of the first phase of the subsidy reform, ambitious social-programs inadequately funded, and a marked deterioration in the external environment stemming from the intensification of trade and financial sanctions, have weakened the economy. Inflation and unemployment are high, while the corporate and banking sectors show signs of weakness. These shocks have exposed structural weaknesses in the economy and in the policy framework.”

Suggestions for specific reforms

  • Tighten monetary policy to curb stagflation and stabilize prices
  • Stabilize the fiscal deficit
  • Increase domestic fuel prices
  • Strengthen the Central Bank’s “supervisory powers and enforcement capacity”
  • Adopt a multi-year budget to encourage longer-term planning
  • Agree on automatic incremental change for subsidy reform
  • Maintain a flexible exchange rate
  • Ease labor regulations