Iran flag Iran: Economic outline

Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Despite the expansion of US sanctions to several key sectors, non-oil GDP grew by 1.1% in 2019/20 led by the agricultural and manufacturing sectors. In 2020, the Islamic Republic of Iran was hit hard by the COVID-19 pandemic. One of the first epicentres of the pandemic, Iran was hit hard because of its slow response, but also because of US sanctions, which led to shortages of medical equipment. Despite this, the Iranian economy grew by 3.3% in 2020 and 4.7% in 2021. According to the IMF's January 2023 forecast, growth reached 3% and should stabilize at 2% in 2023 and 2024. Iran’s economic outlook remains highly uncertain, especially given the COVID-19 evolution, the continuation of US sanctions by the current administration of US President Joe Biden and internal social protests.

The decline in revenues as a result of US sanctions has prompted the government of Iran to satisfy its financing needs through extensive debt issuance and the sale of assets on the stock market. Public debt reached 44.1% of GDP in 2020 42.5% in 2021 and then 34.2% in 2022, from 47.9% in 2019. It is expected to stabilise at 31.9% in 2023 and 32.2% in 2024. The country's current account has reached 0.7% of GDP in 2021, and 1.6% in 2022. The IMF expects the current account to stabilise at 1.5% in 2023 and decrease to 0,8% in 2024. High inflation has placed further economic stress on low-income households as a result of a sharp depreciation of the currency. Iran's ability to counter exchange rate pressures has been hampered by limited reserves and limited access to foreign export earnings. The currency depreciation impacted on consumers as imported goods became more expensive and domestic production prices, especially for tradable goods, increased. Inflation increased to 40.1% in 2021 and stabilized at 40% in 2022. It is expected to be contained at the high rate of 40% in 2023 before decreasing to 30% in 2024 according to the IMF's latest World Economic Outlook (January 2023).

Iran's unemployment rate reached 9.4% in 2022. The IMF estimates that the rate will remain relatively stable in 2023 (9.6%) and in 2024 (9.9%). The number of people no longer actively seeking work is increasing. Years of recession and high inflation have severely challenged household livelihoods and halted poverty reduction trend. In 2018/19, the national poverty rate measured at the international poverty line of $5.5 at purchasing power parity (PPP) was 12.3%, up 1.5 percentage points from the previous year. Inequality (as measured by the Gini index) was 35.6 points and continued to rise. Iran poverty rate for 2019 was 27.60%, a 5.5% increase from 2018. The Islamic Republic’s Ministry of Cooperatives, Labor, and Social Welfare has warned of a whopping number of middle-class Iranians plunging into poverty in 2022 (Iran International, February 2023). According to a report published by ILNA in February 2023, one-third of the country’s population is now living in extreme poverty, after the number almost doubled in one year from 2020 to 2021.

Higher living costs have undermined the value of cash transfers and labour income in real terms. Poverty mitigation measures, including cash transfers, have contributed to partially mitigating pressures on the poor and placed further pressure on fiscal budgets because of a failure to target appropriately. As the number of COVID-19 cases increased, the government applied stricter measures and announced new social transfers in autumn 2020. The economic shock of the COVID-19 pandemic has driven more households into poverty.  As a reaction, the authorities launched new rounds of cash transfers and consumer loans for the lowest income deciles and households with no permanent income source.

Limited non-oil revenue growth owing to a slow recovery, uncertain prospects for higher oil revenues, and higher wage bill and pensions expenditures are expected to keep the fiscal balance in deficit. The government is expected to continue to issue bonds and sell public assets to finance the deficit in 2023. Iran’s economic outlook is shaped by the recovery in demand from export partners, and geopolitical develpments (World Bank, 2022).

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 346.48366.44386.22401.19416.55
GDP (Constant Prices, Annual % Change) 3.83.02.52.02.0
GDP per Capita (USD) 4,0434,2344,4184,5444,671
General Government Gross Debt (in % of GDP) 34.130.630.532.233.8
Inflation Rate (%) n/a47.032.525.025.0
Unemployment Rate (% of the Labour Force) 9.39.49.69.89.8
Current Account (billions USD) 14.4312.5914.1613.1412.08
Current Account (in % of GDP) 4.23.43.73.32.9

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
Iran Rial (IRR) - Average Annual Exchange Rate For 1 ZAR 2,101.682,498.073,082.922,925.9910,466.67

Source: World Bank, 2015

 

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Latest Update: December 2023