Economy of Iran
Iran is a mixed economy with a large public sector. Some 60% of Iran's economy is centrally planned.[25]. Iran's economy is characterized by its hydrocarbon, agricultural, and service sectors, in addition to manufacturing and financial services,[26] with over 40 industries directly involved in the Tehran Stock Exchange. The stock exchange has been one of the best performing exchanges in the world over the past decade.[27] With 10% of the world's proven oil reserves and 15% of its gas reserves, Iran is considered an "energy superpower".[28][29][30][31][32]
Currency
Iranian rial (IRR,﷼)[note 1]
- Developing/Emerging[2]
- Lower-middle income economy[3]
89.705.600 (2024 est.)[4]
- 4.7% (2021)
- 3.0% (2022)
- 2.0% (2023)[6]
- Agriculture: 6.9% (2016 est.)
- Industry: 35.3% (2016 est.)
- Services: 55% (2017 est.)[7]
- Household consumption: 49.7%
- Government consumption: 14%
- Investment in fixed capital: 20.6%
- Investment in inventories: 14.5%
- Exports of goods and services: 26%
- Imports of goods and services: −24.9%
- (2017 est.)[7]
40% (2022)[8]
NA[7]
- 55% living on less than 3.4 million tomans/month (2019; per Majlis Research Center)[9]
22% on less than $6.85/day (2022)[10]
38.8 medium (2018)[11]
8.90% (Dec 2021)[15]
41.758% of GDP (2022)[17]
petroleum, petrochemicals, fertilizers, caustic soda, car manufacture, parts, pharmaceuticals, home appliances, electronics, telecom, energy, power, textiles, construction, cement and other construction materials, food processing (particularly sugar refining and vegetable oil production), ferrous and non-ferrous metal fabrication, armaments
$107.43 billion (2018)[18]
$54.46 billion (2018)[20]
industrial raw materials and intermediate goods (46%), capital goods (35%), foodstuffs and other consumer goods (19%), technical services
$9.142 billion (December 2022)[22]
+3% (of GDP) (2022 est.)[23]
IRR 8,298,940 billion (2022)[17]
IRR 12,487,173 billion (2022)[17]
- Economist Intelligence Unit:
- CCC (Sovereign risk)
- CCC (Currency risk)
- CC (Bank sector risk)
- CC (Political risk)
- B (Economic structure risk)
- CC (Country risk)
- (February 2014)[24]
$85.2 billion (December 31, 2020, est.)[23]
A unique feature of Iran's economy is the presence of large religious foundations called bonyads, whose combined budgets represent more than 30 percent of central government spending.[33]
Price controls and subsidies, particularly on food and energy,[34][35] are heavily prominent in the economy. Contraband, administrative controls, widespread corruption,[36][37] and other restrictive factors undermine private sector-led growth.[38] The government's 20-year vision (as of 2020), involves market-based reforms reflected in the government's, with a five year development plan (FY 2016 to FY 2021) focusing on "a resilient economy" and "progress in science and technology".[39] Most of the country's exports are oil and gas, accounting for a majority of government revenue in 2010.[40] However in March 2022, the Iranian parliament under the then new president Ebrahim Raisi decided to eliminate a major subsidy for importing food, medicines and animal feed, valued at $15 billion in FY2021.[41] Also in March 2022, 20 billion tons of basic goods exports from Russia including vegetable oil, wheat, barley and corn were agreed.[41]
Iran's educated population, high human development, constrained economy and insufficient foreign and domestic investment prompted an increasing number of Iranians to seek overseas employment, resulting in a significant "brain drain".[38][42][43][44] However, in 2015, Iran and the P5+1 reached a deal on the nuclear program which removed most international sanctions. Consequently, for a short period, the tourism industry was significantly improved and the inflation of the country was decreased though US withdrawal from the JCPOA in 2018 hindered the growth of the economy again and increased inflation.
GDP contracted in 2018 and 2019, but a modest rebound was expected in 2020.[45] Challenges include a COVID-19 outbreak starting in February 2020 and US sanctions reimposed in mid-2018, increased unemployment due to the sanctions,[45] inflation,[39][45] a "chronically weak and undercapitalised" banking system,[45][46] and an "anemic" private sector.[45] Iran's currency (Iranian rial) has fallen,[47] and Iran has a relatively low rating in "Economic Freedom",[48][45] and "ease of doing business".[49]
Historical GDP per capita development in Iran (1820–2018)
In 546 BC, Croesus of Lydia was defeated and captured by the Persians, who then adopted gold as the main metal for their coins.[50][51] There are accounts in the biblical Book of Esther of dispatches being sent from Susa to provinces as far out as India and the Kingdom of Kush during the reign of Xerxes the Great (485–465 BC). By the time of Herodotus (c. 475 BC), the Royal Road of the Persian Empire ran some 2,857 km from the city of Susa on the Karun (250 km east of the Tigris) to the port of Smyrna (modern İzmir in Turkey) on the Aegean Sea.
Modern agriculture in Iran dates back to the 1850s when Amir Kabir undertook a number of changes to the traditional agricultural system. Such changes included importing modified seeds and signing collaboration contracts with other countries. Polyakov's Bank Esteqrazi was bought in 1898 by the Tsarist government of Russia, and later passed into the hands of the Iranian government by a contract in 1920.[52] The bank continued its activities under the name of Bank Iran until 1933 when incorporating the newly founded Keshavarzi Bank.[52][53]
The Imperial Bank of Persia was established in 1885, with offices in all major cities of Persia.[52] Reza Shah Pahlavi (r. 1925–41) improved the country's overall infrastructure, implemented educational reform, campaigned against foreign influence, reformed the legal system, and introduced modern industries. During this time, Iran experienced a period of social change, economic development, and relative political stability.[53]
Reza Shah Pahlavi, who abdicated in 1941, was succeeded by his son, Mohammad Reza Shah Pahlavi (r. 1941–79). No fundamental change occurred in the economy of Iran during World War II (1939–45) and the years immediately following. However, between 1954 and 1960 a rapid increase in oil revenues and sustained foreign aid led to greater investment and fast-paced economic growth, primarily in the government sector. Subsequently, inflation increased, the value of the national currency (the rial) depreciated, and a foreign-trade deficit developed. Economic policies implemented to combat these problems led to declines in the rates of nominal economic growth and per capita income by 1961.[53]
Prior to 1979, Iran developed rapidly. Traditionally agricultural, by the 1970s, the country had undergone significant industrialization and modernization.[54][55] The pace slowed by 1978 as capital flight reached $30 to $40 billion 1980-US dollars just before the revolution.[56]
Following the nationalizations in 1979 and the outbreak of the Iran–Iraq War, over 80% of the economy came under government control.[33] The eight-year war with Iraq claimed at least 300,000 Iranian lives and injured more than 500,000. The cost of the war to the country's economy was some $500 billion.[57][58]
After hostilities ceased in 1988, the government tried to develop the country's communication, transportation, manufacturing, health care, education and energy sectors (including its prospective nuclear power facilities), and began integrating its communication and transportation systems with those of neighboring states.[59]
The government's long-term objectives since the revolution were stated as economic independence, full employment, and a comfortable standard of living but Iran's population more than doubled between 1980 and 2000 and its median age declined.[60] Although many Iranians are farmers, agricultural production has consistently fallen since the 1960s. By the late 1990s, Iran imported much of its food. At that time, economic hardship in the countryside resulted in many people moving to cities.[56]
Iran's budget is established by the Management and Planning Organization of Iran and proposed by the government to the parliament before the year's end. Following approval of the budget by Majlis, the central bank presents a detailed monetary and credit policy to the Money and Credit Council (MCC) for approval. Thereafter, major elements of these policies are incorporated into the five-year economic development plan.[53] The plan is part of "Vision 2025", a strategy for long-term sustainable growth.[90]
The sixth five-year development plan for the 2016–2021 period places emphasis on "guidelines" rather than "hard targets".[119] It defines only three priorities: