Iran: Economic and Political Overview
In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response
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 | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 195.53 | 289.29 | 352.21 | 367.97 | 388.84 |
| GDP (Constant Prices, Annual % Change) | 3.3 | 4.7 | 2.5 | 2.0 | 2.0 |
| GDP per Capita (USD) | 2,327 | 3,410 | 4,110 | 4,252 | 4,448 |
| General Government Gross Debt (in % of GDP) | 48.3 | 42.4 | 34.0 | 32.0 | 32.7 |
| Inflation Rate (%) | 36.4 | 40.1 | 49.0 | 42.5 | 30.0 |
| Unemployment Rate (% of the Labour Force) | 9.6 | 9.2 | 9.5 | 9.8 | 10.1 |
| Current Account (billions USD) | -0.71 | 11.15 | 16.69 | 6.73 | 7.22 |
| Current Account (in % of GDP) | -0.4 | 3.9 | 4.7 | 1.8 | 1.9 |
Source: IMF – World Economic Outlook Database , Latest available data
Note: (e) Estimated Data
Iran has a labour force of 27.7 million out of its 88.5 million population (World Bank data, 2023). Agriculture contributes 12.4% of the GDP, employing 17% of the active population. Only 9% of the land is arable and primitive farming methods remain prevalent. The main crops are pistachios (world's largest producer), wheat, rice, oranges, tea and cotton. Illicit cultivation of opium poppy is fairly common.
The industrial sector employs 31% of the workforce and contributes 38% of the GDP (World Bank 2023). Iran's industry is spearheaded by the hydrocarbon industry as the country is rich in mineral resources, mainly oil (4th largest proved crude oil reserves in the world) and gas (2nd place in reserves in the world), copper, lead, zinc, etc. Nevertheless, Iran's crude oil production, which rose gradually in the aftermath of the nuclear agreement, has fallen drastically since 2018 following the implementation of American sanctions on this sector, and it reached the lowest level since the 1980s in July 2019 (International Energy Agency). While the effects of the coronavirus have been severe, Iran has escaped the worst impact of the oil price collapse. This was due to the drop in oil exports caused by the Trump administration's 'maximum pressure' campaign (IAI). According to Reuters, Iran’s oil exports hit a record in the last two months of 2022 and showed a strong start in 2023. The textile industry is the second most important after the oil sector. Other major industries include sugar refining, food-processing, petro-chemicals, cement and construction. Traditional handicrafts, such as carpet weaving and ceramics manufacturing, silk and jewellery are also vital to the economy.
The services sector contributes to 47.3% of the GDP and employs 51% of the workforce (World Bank 2023). Tourism sector is growing despite US sanctions. Iraqi travelers, according to government data, constitute Iran's main source of tourism revenue, followed by tourists from China.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 17.4 | 31.4 | 51.2 |
| Value Added (in % of GDP) | 12.4 | 38.0 | 47.3 |
| Value Added (Annual % Change) | -2.6 | 3.2 | 6.5 |
Source: World Bank - Latest available data.
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| Monetary Indicators | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Iran Rial (IRR) - Average Annual Exchange Rate For 1 MUR | 869.81 | 963.60 | 1,204.21 | 1,186.88 | 4,382.32 |
Source: World Bank - Latest available data.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
See the country risk analysis provided by Coface.
Iran is a member of the Organisation of Petroleum Exporting Countries (OPEC), the 5th largest producer among its members and the 9th largest producer in the world. The share of foreign trade in the country's GDP was over 44% in 2021 (World Bank, 2023). Exports are spearheaded by crude oil and petroleum products (67.2%), whereas maize and corn, rice, soya beans and medicines are among the main items of import.
Iran's main partners are China (21% of total exports), Iraq (21%), the United Arab Emirates (14%), Afghanistan (6.8%) and South Korea (5.9%). China is also the main supplier of goods to Iran (25% of total imports), followed by the United Arab Emirates (14%), India (6.5%), Turkey (6.3%) and Germany with 6% (Trading Economics, 2022). Imports in Iran increased to 15010 USD Million in the third quarter of 2022 from 13025 USD Million in the second quarter of 2021 (Central Bank of Iran, 2023).
The country has a structurally positive trade balance thanks to oil exports (70% of total exports in 2022); however, its scope is largely dependent on global oil prices. In 2020, merchandise exports for Iran was 53,543 million USD. Though Iran merchandise exports fluctuated substantially in recent years, it tended to increase in the past decade, ending at 53,543 million US dollars in 2020. China reported the first imports of Iranian crude oil in a year despite ongoing sanctions by the United States government, according to data released in January 2022. China brought in 260,312 tonnes of Iranian crude oil in December 2021, according to data from the General Administration of Chinese Customs, which last recorded Iranian oil inflows in December 2020 at 520,000 tonnes.
The government is aiming to diversify the country's exports, given that diversification of non-oil exports would lower the economy’s vulnerability.
| Foreign Trade Indicators | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
| Imports of Goods (million USD) | 49,499 | 49,353 | 41,828 | 38,757 | 48,978 |
| Exports of Goods (million USD) | 92,764 | 103,422 | 65,718 | 53,543 | 71,646 |
| Imports of Services (million USD) | 0 | 16,527 | 14,066 | 6,838 | 11,077 |
| Exports of Services (million USD) | 0 | 9,596 | 9,949 | 4,482 | 5,767 |
| Imports of Goods and Services (Annual % Change) | 6.8 | -26.3 | -32.5 | -29.7 | 24.1 |
| Exports of Goods and Services (Annual % Change) | 0.5 | -4.4 | -17.3 | -12.8 | 5.2 |
| Imports of Goods and Services (in % of GDP) | 22.0 | 28.2 | 27.3 | 24.4 | 21.5 |
| Exports of Goods and Services (in % of GDP) | 22.7 | 30.2 | 23.5 | 19.4 | 22.8 |
| Foreign Trade (in % of GDP) | 44.7 | 58.4 | 50.8 | 43.8 | 44.4 |
Source: WTO – World Trade Organisation ; World Bank , Latest Available Data
| Main Customers (% of Exports) |
2018 |
|---|---|
| China | 9.5% |
| Iraq | 9.3% |
| United Arab Emirates | 6.2% |
| Afghanistan | 3.0% |
| South Korea | 2.7% |
| See More Countries | 69.3% |
| Main Suppliers (% of Imports) |
2018 |
|---|---|
| China | 24.9% |
| United Arab Emirates | 13.8% |
| India | 6.4% |
| Türkiye | 6.3% |
| Germany | 5.9% |
| See More Countries | 42.7% |
Source: Comtrade, Latest Available Data
Source: Comtrade, Latest Available Data
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According to latest parliamentary elections that were held in 2020, the Principlists, also known as the Iranian Conservatives, won 227 of the 290 seats. The main political groups are:
- Reformists (Friends of Hashem and Coalition of Eight Reformist Parties);
- Conservatives (includes Combatant Clergy Association and Islamic Coalition Party, Society of Devotees and Pathseekers of the Islamic Revolution, Front of Islamic Revolution Stability).
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The UK Foreign travel advice also provides comprehensive travelling abroad advice for all countries, including the latest information on health, safety, security, entry requirements and travel warnings.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Iranian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Iran in the IMF’s Policy Tracker platform.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
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Latest Update: September 2023
