Economic and Political Overview

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In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

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.

The reintroduction of sanctions by the U.S. government, coupled with the fall of oil prices, brought the Iranian economy into recession, and GDP shrank by 6.8% in 2019 amid declining consumption, oil exports and construction activity. The non-oil sectors generate most of Iran's economic output and jobs and have proven more resilient under U.S. sanctions than the energy sector. Despite the expansion of US sanctions to other 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 3.4% in 2020 and 2.5% in 2021. According to the IMF's October 2021 forecast, growth is expected to stabilise in 2022 and 2023, estimated at 2% of GDP respectively. Iran’s economic outlook remains highly uncertain, especially given the COVID-19 evolution and the continuation of US sanctions by the current administration of US President Joe Biden.

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. The fiscal deficit-to-GDP ratio more than doubled to 3.7% in 2019/20 as oil revenues have halved and their share in budget revenues has fallen to an all-time low. Public debt decreased to 39.5% of GDP in 2020 and then 33.6% in 2021 from 47.9% in 2019. It is expected to stabilise at 33.3% in 2022 and 34.2% in 2022. In addition, the country's current account has reached a negative rate of -0.1% in 2020, due to US sanctions, before bouncing back to 1.3% in 2021. The IMF expects the current account to stabilise at 1% in 2022 and 2021. 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 36.4% in 2020 and 39.3% in 2021 up from 34.6% in 2019. It is expected to be contained at the high rate of 27.5% in 2022 and then 25% in 2023 according to the IMF's latest World Economic Outlook (April 2021).

Iran's unemployment rate decreased to 9.6% in 2020 despite the negative economic impact of the COVID-19 pandemic but came back to 10% in 2021. The IMF estimates that the rate will remain relatively stable in 2022 (10.5%) and in 2023 (10.8%). 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 after 2016/17. 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 2022. Iran’s economic outlook is shaped by the expectations about the course of the pandemic, the recovery in demand from export partners, and geopolitical develpments (World Bank, 2022).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 581.25835.35e1,081.381,136.681,189.10
GDP (Constant Prices, Annual % Change) -6.83.4e2.52.02.0
GDP per Capita (USD) 6,9819,92812,72513,24313,717
General Government Gross Debt (in % of GDP) 47.939.5e33.633.334.2
Inflation Rate (%) 34.636.440.132.327.5
Unemployment Rate (% of the Labour Force) 10.69.610.010.510.8
Current Account (billions USD) 3.75-0.7113.9211.2311.78
Current Account (in % of GDP) 0.6-0.11.31.01.0

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Iran has a labour force of 26.8 million out of its 84 million population (World Bank data, 2022). Agriculture contributes 12.8% of the GDP, employing 17.4% 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 31.4% of the workforce and contributes 30.6% of the GDP (World Bank 2022). 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). 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 57% of the GDP and employs 51.2% of the workforce (World Bank 2022). 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) 12.8 30.6 57.0
Value Added (Annual % Change) 4.0 4.3 -6.1

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Iran Rial (IRR) - Average Annual Exchange Rate For 1 MUR 869.81963.601,204.211,186.884,382.32

Source: World Bank - Latest available data.

 
 

Find out all the exchange rates daily on our service Currency Converter.

Indicator of Economic Freedom

Definition:

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.

Score:
47,2/100
World Rank:
168
Regional Rank:
14

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

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.

Score:
3.58/10
World Rank:
79/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

Iran is a member of the Organisation of Petroleum Exporting Countries (OPEC), the second largest producer among its members and the fifth largest producer in the world. The share of foreign trade in the country's GDP is over 51.3% (World Bank, latest available data of 2020). Exports are spearheaded by crude oil and petroleum products (69%), whereas Machinery, nuclear reactors, boilers, cereal and electric and electronic equipments 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).

The country has a structurally positive trade balance thanks to oil exports (69% of total exports); 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 20162017201820192020
Imports of Goods (million USD) 40,00049,49949,35341,82838,757
Exports of Goods (million USD) 66,00092,764103,42265,71853,543
Imports of Services (million USD) 14,694016,52714,0666,838
Exports of Services (million USD) 10,20209,5969,9494,482
Imports of Goods and Services (Annual % Change) 6.113.4-29.5-38.1-32.4
Exports of Goods and Services (Annual % Change) 41.31.8-12.5-29.9-12.2
Imports of Goods and Services (in % of GDP) 20.823.831.830.921.1
Exports of Goods and Services (in % of GDP) 22.424.933.225.315.0
Foreign Trade (in % of GDP) 43.248.865.156.236.2

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

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%
Turkey 6.3%
Germany 5.9%
See More Countries 42.7%

Source: Comtrade, Latest Available Data

 
 

Main Products

96.6 bn USD of products exported in 2018
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals, crude 52.6%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 9.3%
Petroleum gas and other gaseous hydrocarbonsPetroleum gas and other gaseous hydrocarbons 5.5%
Polymers of ethylene, in primary formsPolymers of ethylene, in primary forms 3.5%
Acyclic alcohols and their halogenated,...Acyclic alcohols and their halogenated, sulphonated, nitrated or nitrosated derivatives 2.3%
See More Products 26.8%
41.2 bn USD of products imported in 2018
Maize or cornMaize or corn 5.1%
RiceRice 3.9%
Soya beans, whether or not brokenSoya beans, whether or not broken 2.8%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 2.7%
Electrical apparatus for line telephony or line...Electrical apparatus for line telephony or line telegraphy, incl. line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line systems; videophones; parts thereof 1.9%
See More Products 83.5%

Source: Comtrade, Latest Available Data

 
 

To go further, check out our service Import Export Flows.

 
 

Main Services

Source: United Nations Statistics Division, Latest Available Data

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Political Outline

Current Political Leaders
Supreme Leader: Ayatollah Ali Hoseini KHAMENEI (since June 1989)
President: Ebrahim RAISI (since 3 August 2021)
Next Election Dates
Presidential election: 2025
Parliamentary election: 2024
Main Political Parties
Fundamentalist and conservative groups often dominate the political sphere in Iran. The Supreme Leader, Ayatollah Khamenei, exerts enormous influence over the parliament. With the ushering in of the more centrist Rouhani government in 2013, factionalism is on the rise between the country's different political forces.

According to latest parliamentary elections that were held in 2020, 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).

Type of State
Islamic Republic. Theocratic republic based on a parliamentary democracy.
Executive Power
The chief of state is the Supreme Leader of the Islamic Revolution appointed for life time by the Assembly of Experts. The Supreme Leader is Commander-in-Chief of the armed forces, controls the military intelligence and security operations, and has sole power to declare war. The head of the government is the President who is elected by popular vote for a four year term. The Council of Ministers (cabinet) is selected by the President with legislative approval. The President enjoys executive powers, except for matters directly related to the Supreme Leader.
Legislative Power
The legislature is unicameral. The parliament consists of Islamic Consultative Assembly having 290 seats with its members elected by popular vote to serve four-year terms. The Parliament must get the laws validated by the Guardian Council which checks if the laws suggested do not go against Islamic principles. The Parliament has real powers in Iran. It can in particular decide dismissal of a minister. The President cannot dissolve the parliament directly but can recommend the same to Supreme Leader.
 

Indicator of Freedom of the Press

Definition:

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.).

World Rank:
174/180
Evolution:
173/180
 

Indicator of Political Freedom

Definition:

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.

Ranking:
Not Free
Political Freedom:
6/7
Civil Liberties:
10/60

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID19 disease in Iran, please visit the Iranian Ministry of Health. Official information on the progress of the epidemic in Iran is consolidated by The Ministry of Health. The agency provides a daily epidemiological update, which includes key national figures.

For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures
To find out about the latest public health situation in Iran and the current sanitary measures in vigour, please consult the Iranian Ministry of Health website, including the up-to-date information on the containment measures put in place and public health recommendations.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including 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 US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the House of Industry, Mine and Trade and the Iranian Customs Administration

For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Iran on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan
For the information on the economic recovery scheme put in place by the Iranian government to address the impact of the COVID19 pandemic on the Iranian economy, please visit the website of the Iranian Ministry of Economic Affairs and Finance.

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.

Support plan for businesses
For the information on the local business support scheme established by the Iranian government to help small and  medium-sized companies to deal with the economic impacts of the COVID19 epidemic on their activity, please consult  the Ministry of Economic Affairs and Finance website.

For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters
To find out about the support plan for exporters put in place by the Iranian government, please consult the Iranian Ministry of Economic Affairs and Finance website.
 

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Latest Update: October 2022