PRESIDENT Mahmoud Ahmadinejad (pic) predicted yesterday that Iran's economy would grow eight per cent over the next 12 months despite severe Western sanctions, as he presented his government's annual budget to parliament.

Gross domestic product (GDP) would swell significantly, Ahmadinejad was quoted as saying by the official IRNA news agency, without providing any details on what components of the economy would generate the growth.

That would continue a trend seen in recent years as Iran OPEC's second-biggest producer profits from historically high oil prices.

Ahmadinejad set out a US$416 billion (€316.6 billion) state budget for Iran's calendar and fiscal year, which runs this year from mid-March.

That was 14 per cent less than for the 2011-2012 budget, which was set at US$484 billion.

The president did not quantify the size of the economy.

But the International Monetary Fund estimates that 2011 GDP (from January to December) was US$480 billion at the official exchange rate, around 2.5 per cent higher than the previous year.

Ahmadinejad did not refer to the government's estimated price for oil, which accounts for more than half of budget revenues.

The last budget calculated oil revenues at US$82 per barrel. Iran gets 80 per cent of its foreign revenues from oil exports.

Nor did Ahmadinejad mention the exchange rate the government was counting on for the Iranian rial against the dollar.

The rial has slipped sharply against the dollar in the past three months, losing around half its value as Western sanctions have piled up.

State television, however, reported that the exchange rate would be calculated at 11,500 rials to the dollar.

AFP