Ahmadinejad rejects economic criticism ahead of vote

By Fredrik Dahl

TEHRAN (Reuters) - President Mahmoud Ahmadinejad, dismissing criticism of his economic record ahead of next month's election, said on Saturday Iran was showing growth of 5-6 percent despite the global downturn.

Ahmadinejad's moderate rivals in the June 12 presidential vote have accused his government of squandering windfall revenue when oil prices were soaring, stoking inflation and leaving the country vulnerable when they started tumbling in mid-2008.

Analysts say high inflation and other economic bread-and-butter issues are likely to be a key battleground in the election campaign, possibly overshadowing the Islamic Republic's nuclear dispute with the West.

"We deeply believe that the economic situation of Iran these days is a stable one," the conservative president told a news conference for Iranian media broadcast live and translated by the English-language Press TV.

"There is negative growth everywhere you look (in the world) ... but in Iran the growth rate is positive and is over 5 percent and even 6 percent," he said.

In a 2008 report, the International Monetary Fund predicted that Iran's economy would expand by 4.9 percent in the 2010-11 year, down from 5.2 this year.

But that was before oil prices started plunging and a Western diplomat this week told Reuters he believed economic growth would slow sharply in the world's fifth-largest oil exporter, perhaps approaching zero.

"SIGNIFICANT PROBLEMS"

Ahmadinejad's main election rivals, including moderate former Prime Minister Mirhossin Mousavi, blame him for rising consumer prices and for failure to bring down unemployment of around 10 percent despite profligate spending of petrodollars.

Analysts also say that Iran, which is under U.N. and U.S. sanctions over its refusal to halt sensitive nuclear work, faces growing economic difficulties.

"Iran's economic problems are significant: inflation, unemployment and potentially very large deficits head the list," said Cliff Kupchan of Eurasia risk consultancy.

But Ahmadinejad supporters say the economy has held up well in the face of the global slowdown and also point to falling annual inflation in recent months, to some 18 percent in March compared with a peak of nearly 30 percent in October.

Economists say this is partly due to the lower oil price, which is expected to force the government to rein in spending, as well as monetary tightening under former Central Bank governor Tahmasb Mazaheri, who was replaced last September.

Ahmadinejad said Iran on Saturday opened a steel plant, at a time when such production faced declines in other countries.

"We are moving forward but everything is going the other way around elsewhere in the world," he said.  Continued...