A unique feature of Iran's economy is the reliance on large religious foundations called bonyads, whose combined budgets represent more than 30 percent of central government spending.[32]
In 2007, the Iranian subsidy reform plan introduced price controls and subsidies particularly on food and energy.[33][34]Contraband, administrative controls, widespread corruption,[35][36] and other restrictive factors undermine private sector-led growth.[37] The government's 20-year vision involved market-based reforms reflected in a five year development plan, 2016 to 2021, focusing on "a resilient economy" and "progress in science and technology".[38] Most of Iran's exports are oil and gas, accounting for a majority of government revenue in 2010.[39] 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 2021.[40] Also in March 2022, 20 billion tons of basic goods exports from Russia including vegetable oil, wheat, barley and corn were agreed.[40]
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 and the years immediately following. 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.[32] 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 Iran'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 national science budget in 2005 was about $900 million, roughly equivalent to the 1990 figure.[61] By early 2000, Iran allocated around 0.4% of its GDP to research and development, ranking the country behind the world average of 1.4%.[62] In 2009 the ratio of research to GDP was 0.87% against the government's medium-term target of 2.5%.[63] Iran ranked first in scientific growth in the world in 2011 and 17th in science production in 2012.[citation needed]
Iran has a broad and diversified industrial base.[64] According to The Economist, Iran ranked 39th in a list of industrialized nations, producing $23 billion of industrial products in 2008.[65] Between 2008 and 2009 Iran moved to 28th from 69th place in annual industrial production growth because of its relative isolation from the 2008 international financial crisis.[66]
In the early 21st century, the service sector was Iran's largest, followed by industry (mining and manufacturing) and agriculture. In 2008, Iran's GDP was estimated at $382.3 billion ($842 billion PPP), or $5,470 per capita ($12,800 PPP).[37]
In 2008, according to Goldman Sachs, Iran has the potential to become one of the world's largest economies in the 21st century.[77][78] In 2014, Iranian President Hassan Rouhani stated that Iran has the potential to become one of the ten largest economies within the next 30 years.[79]
By removing energy subsidies, Iran intends to make its industries more efficient and competitive.[86] By 2016, one third of Iran's economic growth is expected to originate from productivity improvement. Energy subsidies left the economy as one of the world's least energy-efficient, with energy intensity three times the global average and 2.5 times higher than the Middle Eastern average.[87] Notwithstanding its own issues, the banking sector is seen as a potential hedge against the removal of subsidies, as the plan is not expected to directly impact banks.[88]
20% of domestic trade, 30% of foreign trade and 80% of government transactions to be made electronically[117]
Sixth development plan (2016–2021)
The sixth five-year development plan for the 2016–2021 period places emphasis on "guidelines" rather than "hard targets".[118] It defines only three priorities:
Iran had an estimated $110 billion in foreign reserves in 2011[127] and balances its external payments by pricing oil at approximately $75 per barrel.[128] As of 2013, only $30 to $50 billion of those reserves are accessible because of current sanctions.[129]Iranian media has questioned the reason behind Iran's government non-repatriation of its foreign reserves before the imposition of the latest round of sanctions and its failure to convert into gold. As a consequence, the Iranian rial lost more than 40% of its value between December 2011 and April 2012.[126]
Iran's external and fiscal accounts reflect falling oil prices in FY 2012, but remain in surplus. The current account was expected to reach a surplus of 2.1% of GDP in FY 2012, and the net fiscal balance (after payments to Iran's National Development Fund) will register a surplus of 0.3% of GDP.[68] In 2013 the external debts stood at $7.2 billion down from $17.3 billion in 2012.[130] Overall fiscal deficit is expected to deteriorate to 2.7% of GDP in FY 2016 from 1.7% in 2015.[131]
In 2024, Iran passed a law to make a two day weekend. Saturday was added to Friday weekends and Thursdays were removed. The work week was reduced from 44 hours to 40/42 hours.[134][135]
The GDP of Iran contracted in FY 2018 and FY 2019 and modest rebound is expected in 2020/2021 according to an April 2020 World Economic Outlook by the IMF.[44]
Challenges to the economy include the COVID-19 outbreak starting in February 2020, which on top of US sanctions reimposed in mid-2018 and other factors, led a fall in oil production and are projected to lead to a slow recovery in oil exports.[38] Labor-force participation has risen[44] but unemployment is above 10% as of 2020 and projected to rise in 2021 and 2022.[44]
Inflation reached 41.1% in 2019, and is expected to continue "in the coming years" according to the World Bank,[38] but decline into the 34-33% range.[44] In July 2022, the average inflation rate rose 40.5% while the inflation rate for food and beverages alone rose 87%.[136][137]Iran's banking system is "chronically weak and undercapitalised" according to Nordea Bank Abp,[44] holding billions of dollars of non-performing loans,[46] and the private sector remains "anemic".[44]
The unofficial Iranian rial to US dollar exchange rate, which had plateaued at 40,000 to one in 2017, has fallen 120,000 to one as of November 2019.[47] Iran's economy has a relatively low rating in the Heritage Foundation's "Index of Economic Freedom" (164 out of 180);[48][44] and ease of doing business ranking (127 among 190) according to the World Bank.[49] Critics have complained that privatization has led not to state owned businesses being taken over by "skilled businesspeople" but by the powerful Islamic Revolutionary Guard Corps "and its associates".[138]
In 2020, an Iranian businessperson complained to a foreign journalist (Dexter Filkins) that the uncertainty of "chronic shortages of material and unruly inspectors pushing for bribes" made operating his business very difficult -- "Plan for the next quarter? I can't plan for tomorrow morning."[138]
In 2021, according to the NIOC, daily consumption of gasoline in Iran has surpassed 85 million liters, i.e., 10 times more than Turkey with almost the same population.[139]
Following the hostilities with Iraq, the Government declared its intention to privatize most industries and to liberalize and decentralize the economy.[143] Sale of state-owned companies proceeded slowly, mainly due to opposition by a nationalist majority in the parliament. In 2006, most industries, some 70% of the economy, remained state-owned.[37] The majority of heavy industries including steel, petrochemicals, copper, automobiles, and machine tools remained in the public sector, with most light industry privately owned.[37]
Article 44 of the Iranian Constitution declares that the country's economy should consist of state, cooperative, and private based sectors. The state sector includes all large-scale industries, foreign trade, major minerals, banking, insurance, power generation, dams and large-scale irrigation networks, radio and television, post, telegraph and telephone services, aviation, shipping, roads, railroads and the like. These are publicly owned and administered by the State. Cooperative companies and enterprises concerned with production and distribution in urban and rural areas form the basis of the cooperative sector and operated in accordance with Shariah law. As of 2012, 5,923 consumer cooperatives, employed 128,396.[144] Consumer cooperatives have over six million members.[144] Private sector operate in construction, agriculture, animal husbandry, industry, trade, and services that supplement the economic activities of the state and cooperative sectors.[145]
Since Article 44 has never been strictly enforced, the private sector has played a much larger role than that outlined in the constitution.[146] In recent years, the role of this sector has increased. A 2004 constitutional amendment allows 80% of state assets to be privatized. Forty percent of such sales are to be conducted through the "Justice Shares" scheme and the rest through the Tehran Stock Exchange. The government would retain the remaining 20%.[147][148]
In 2005, government assets were estimated at around $120 billion. Some $63 billion of such assets were privatized from 2005 to 2010, reducing the government's direct share of GDP from 80% to 40%.[citation needed] Many companies in Iran remain uncompetitive because of mismanagement over the years, thus making privatization less attractive for potential investors.[149] According to then-President Mahmoud Ahmadinejad, 60% of Iran's wealth is controlled by just 300 people.[150]
Welfare programs for the needy are managed by more than 30 public agencies alongside semi-state organizations known as bonyads, together with several private non-governmental organizations. Bonyads are a consortium of over 120 tax-exempt organizations that receive subsidies and religious donations. They answer directly to the Supreme Leader of Iran and control over 20% of GDP.[151][157] Operating everything from vast soybean and cotton farms to hotels, soft drink, automobile manufacturing, and shipping lines, they are seen as overstaffed, corrupt and generally unprofitable.[158]
Bonyad companies compete with Iran's unprotected private sector, whose firms complain of the difficulty of competing with the subsidized bonyads.[158]Bonyads are not subject to audit or Iran's accounting laws.[159]Setad is a multi-sector business organization, with holdings of 37 companies, and an estimated value of $95 billion. It is under the control of the Supreme Leader, Ali Khamenei, and created from thousands of properties confiscated from Iranians.[160]
Labor force: 18,364,211 (total) note: Lack of skilled labor[161]
After the revolution, the government established a national education system that improved adult literacy rates. In 2008, 85% of the adult population was literate, well ahead of the regional average of 62%.[162][163] The Human Development Index was 0.749 in 2013, placing Iran in the "high human development" bracket.[43]
In 2008, annual economic growth of above 5% was necessary to absorb the 750,000 new labor force entrants each year.[164] In 2020, agriculture was 10% of GDP and employed 16% of the labor force.[7] In 2017, the industrial sector, which includes mining, manufacturing, and construction, was 35% of GDP and employed 35% of the labor force.[7] In 2009, mineral products, notably petroleum, accounted for 80% of Iran's export revenues, even though mining employs less than 1% of the labor force.[63]
In 2004, the service sector ranked as the largest contributor to GDP, at 48% of the economy, and employed 44% of workers.[37]Women made up 33% of the labor force in 2005.[165] Youth unemployment, aged 15–24, was 29.1% in 2012, resulting in significant brain drain.[37][166] In 2016, according to the government, some 40% of the workforce in the public sector are either in excess or incompetent.[167]
Unemployment rate, per-capita income growth and minimum wage, 2000–2009GNI per capita:
Iran in 2010: $4,520 nominal. 2012: $13,000 PPP.[168]
Higher GNI per capita compared to Iran
Lower GNI per capita compared to Iran
Iran is classed as a middle income country and has made significant progress in provision of health and education services in the period covered by the Millennium Development Goals (MDGs). In 2010, Iran's average monthly income was about $500. The GNI per capita in 2012 was $13,000, by PPP.[37][168][169][170] A minimum national wage applies to each sector of activity as defined by the Supreme Labor Council. In 2009 this was about $263 per month ($3,156 per year).[171]
In 2001, approximately 20% of household consumption was spent on food, 32% on fuel, 12% on health care and 8% on education.[172] In 2015, Iranians had little personal debt.[173] In 2007, seventy percent of Iranians owned their homes.[174]
In 2018–2019, the median household income of Iran was 434,905,000 rials (a bit above $3,300), an 18.6% rise from 2017–2018, when median household income was about 366,700,000 rials.[citation needed] Adjusted for purchasing power parity, Iran's 2017–2018 median income was equivalent to about $28,647 (2017 conversion factor, private consumption, LCU).[175]
As the average Iranian household size is 3.5, this puts median personal income at around $8,185.[176] While Iran rates relatively well on income, median wealth is very low for its income level, on par with Vietnam or Djibouti, indicating a high level of spending. According to SCI, median household spending in 2018 was 393,227,000 rials, or 90.5% of the median household income of 434,905,000 rials.[citation needed]
After the Revolution, the composition of the middle class in Iran did not change significantly, but its size doubled from about 15% of the population in 1979 to more than 32% in 2000.[177] In 2008, the official poverty line in Tehran for 2008 was $9,612. The national average poverty line was $4,932.[178] In 2010, Iran's Department of Statistics announced that 10 million Iranians live under the absolute poverty line and 30 million live under the relative poverty line.[179]
Although Iran does not offer universal social protection, in 1996, the Iranian Center for Statistics estimated that more than 73% of the Iranian population was covered by social security.[180] Membership of the social security system for all employees is compulsory.[181]
Social security ensures employee protection against unemployment, disease, old age and occupational accidents.[182] In 2003, the government began to consolidate its welfare organizations to eliminate redundancy and inefficiency. In 2003 the minimum standard pension was 50% of the worker's earnings but no less than the minimum wage.[182] Iran spent 22.5% of its 2003 national budget on social welfare programs of which more than 50% covered pension costs.[183] Out of the 15,000 homeless in Iran in 2015, 5,000 were women.[184]
Employees between the age of 18 and 65 years are covered by the social security system with financing shared between the employee (7% of salary), the employer (20–23%) and the state, which in turn supplements the employer contribution up to 3%.[185] Social security applies to self-employed workers, who voluntarily contribute between 12% and 18% of income depending on the protection sought.[182]Civil servants, the regular military, law enforcement agencies, and IRGC have their own pension systems.[186]
Although Iranian workers have a theoretical right to form labor unions, there is no union system in the country. Ostensible worker representation is provided by the Workers' House, a state-sponsored institution that attempts to challenge some state policies.[187]Guild unions operate locally in most areas, but are limited largely to issuing credentials and licenses. The right to strike is generally not respected by the state. Since 1979 strikes have often been met by police action.[188]
A comprehensive law covers labor relations, including hiring of foreign workers. This provides a broad and inclusive definition of the individuals it covers, recognizing written, oral, temporary and indefinite employment contracts. Considered employee-friendly, the labor law makes it difficult to lay off staff. Employing personnel on consecutive six-month contracts (to avoid paying benefits) is illegal, as is dismissing staff without proof of a serious offense. Labor disputes are settled by a special labor council, which usually rules in favor of the employee.[181]
Wheat, the most important crop, is grown mainly in the west and northwest whilst rice is the major crop in the Caspian region.
Agriculture contributes 9.5% to the gross domestic product and employs 17% of the labor force.[44] About 9% of Iran's land is arable,[189] with the main food-producing areas located in the Caspian region and in northwestern valleys. Some northern and western areas support rain-fed agriculture, while others require irrigation.[190]
Primitive farming methods, overworked and under-fertilized soil, poor seed and water scarcity are the principal obstacles to increased production. About one third of total cultivated land is irrigated. Construction of multipurpose dams and reservoirs along rivers in the Zagros and Alborz mountains have increased the amount of water available for irrigation. Agricultural production is increasing as a result of modernization, mechanization, improvements to crops and livestock as well as land redistribution programs.[191]
Wheat, the most important crop, is grown mainly in the west and northwest. Rice is the major crop in the Caspian region. Other crops include barley, corn, cotton, sugar beets, tea, hemp, tobacco, fruits, potatoes, legumes (beans and lentils), vegetables, fodder plants (alfalfa and clover), almonds, walnuts and spices including cumin and sumac. Iran is the world's largest producer of saffron, pistachios, honey, berberis and berries and the second largest date producer.[192] Meat and dairy products include lamb, goat meat, beef, poultry, milk, eggs, butter, and cheese.
Non-food products include wool, leather, and silk. Forestry products from the northern slopes of the Alborz Mountains are economically important. Tree-cutting is strictly controlled by the government, which also runs a reforestation program. Rivers drain into the Caspian Sea and are fished for salmon, carp, trout, pike, and sturgeon that produce caviar, of which Iran is the largest producer.[191][193]
Since the 1979 revolution, commercial farming has replaced subsistence farming as the dominant mode of agricultural production. By 1997, the gross value reached $25 billion.[63] Iran is 90% self-sufficient in essential agricultural products, although limited rice production leads to substantial imports. In 2007 Iran reached self-sufficiency in wheat production and for the first time became a net wheat exporter.[194] By 2003, a quarter of Iran's non-oil exports were of agricultural products,[195] including fresh and dried fruits, nuts, animal hides, processed foods, and spices.[63] Iran exported $736 million worth of foodstuffs in 2007 and $1 billion (~600,000 tonnes) in 2010.[196] A total of 12,198 entities are engaged in the Iranian food industry, or 12% of all entities in the industry sector. The sector also employs approximately 328,000 people or 16.1% of the
entire industry sector's workforce.[197]
Large-scale factory manufacturing began in the 1920s. During the Iran–Iraq War, Iraq bombed many of Iran's petrochemical plants, damaging the large oil refinery at Abadan bringing production to a halt. Reconstruction began in 1988 and production resumed in 1993. In spite of the war, many small factories sprang up to produce import-substitution goods and materials needed by the military.[198]
Iran's major manufactured products are petrochemicals, steel and copper products. Other important manufactures include automobiles, home and electric appliances, telecommunications equipment, cement and industrial machinery. Iran operates the largest operational population of industrial robots in West Asia.[199] Other products include paper, rubber products, processed foods, leather products and pharmaceuticals. In 2000, textile mills, using domestic cotton and wool such as Tehran Patou and Iran Termeh employed around 400,000 people around Tehran, Isfahan and along the Caspian coast.[200][201]
Iran has a long tradition of producing artisanal goods including Persian carpets, ceramics, copperware, brassware, glass, leather goods, textiles and wooden artifacts. The country's carpet-weaving tradition dates from pre-Islamic times and remains an important industry contributing substantial amounts to rural incomes. An estimated 1.2 million weavers in Iran produce carpets for domestic and international export markets.[citation needed] More than $500 million worth of hand-woven carpets are exported each year, accounting for 30% of the 2008 world market.[203][204] Around 5.2 million people work in some 250 handicraft fields and contribute 3% of GDP.[citation needed]
Iran Khodro is the largest car manufacturer in the Middle-East. It has established joint-ventures with foreign partners on 4 continents.
As of 2001, 13 public and privately owned automakers within Iran, led by Iran Khodro and Saipa that accounted for 94% of domestic production. Iran Khodro's Paykan, replaced by the Samand in 2005, is the predominant brand. With 61% of the 2001 market, Khodro was the largest player, whilst Saipa contributed 33% that year. Other car manufacturers, such as the Bahman Group, Kerman Motors, Kish Khodro, Raniran, Traktorsazi, Shahab Khodro and others accounted for the remaining 6%.[205]
These automakers produce a wide range of vehicles including motorbikes, passenger cars such as Saipa's Tiba, vans, mini trucks, medium-sized trucks, heavy trucks, minibuses, large buses and other heavy automobiles used for commercial and private activities in the country. In 2009 Iran ranked fifth in car production growth after China, Taiwan, Romania and India.[206] Iran was the world's 12th biggest automaker in 2010 and operates a fleet of 11.5 million cars.[207][208][209][210] Iran produced 1,395,421 cars in 2010, including 35,901 commercial vehicles.[citation needed]
In 2007 the International Institute for Strategic Studies estimated Iran's defense budget at $7.31 billion, equivalent to 2.6% of GDP or $102 per capita, ranking it 25th internationally. The country's defense industry manufactures many types of arms and equipment. Since 1992, Iran's Defense Industries Organization (DIO) has produced its own tanks, armored personnel carriers, guided missiles, radar systems, guided missile destroyers, military vessels, submarines and fighter planes.[211] In 2006 Iran exported weapons to 57 countries, including NATO members, and exports reached $100 million.[212][213] It has also developed a sophisticated mobile air defense system dubbed as Bavar 373.[214]
Until the early 1950s construction remained in the hands of small domestic companies. Increased income from oil and gas and easy credit triggered a building boom that attracted international construction firms to the country. This growth continued until the mid-1970s when a sharp rise in inflation and a credit squeeze collapsed the boom. The construction industry had revived somewhat by the mid-1980s, although housing shortages and speculation remained serious problems, especially in large urban centers. As of January 2011, the banking sector, particularly Bank Maskan, had loaned up to 102 trillion rials ($10.2 billion) to applicants of Mehr housing scheme.[215] Construction is one of the most important sectors accounting for 20–50% of total private investment in urban areas and was one of the prime investment targets of well-off Iranians.[183]
Annual turnover amounted to $38.4 billion in 2005 and $32.8 billion in 2011.[216][217] Because of poor construction quality, many buildings need seismic reinforcement or renovation.[218] Iran has a large dam building industry.[219]
Mineral production contributed 0.6% of the country's GDP in 2011,[citation needed] a figure that increases to 4% when mining-related industries are included. Gating factors include poor infrastructure, legal barriers, exploration difficulties, and government control over all resources.[221] Iran is ranked among the world's 15 major mineral-rich countries.[222]
Although the petroleum industry provides the majority of revenue, about 75% of all mining sector employees work in mines producing minerals other than oil and natural gas.[63] These include coal, iron ore, copper, lead, zinc, chromium, barite, salt, gypsum, molybdenum, strontium, silica, uranium, and gold, the latter of which is mainly a by-product of the Sar Cheshmeh copper complex operation.[223] The mine at Sar Cheshmeh in Kerman Province is home to the world's second largest store of copper.[224]
Large iron ore deposits exist in central Iran, near Bafq, Yazd and Kerman. The government owns 90% of all mines and related industries and is seeking foreign investment.[221] The sector accounts for 3% of exports.[221]
In 2019, the country was the 2nd largest world producer of gypsum;[225] the 8th largest world producer of molybdenum;[226] the world's 8th largest producer of antimony;[227] the 11th largest world producer of iron ore;[228] the 18th largest world producer of sulfur,[229] in addition to being the 21st largest worldwide producer of salt.[230] It was the 13th largest producer in the world of uranium in 2018.[231]
Iran has recoverable coal reserves of nearly 1.9 billion short tonnes. By mid-2008, the country produced about 1.3 million short tonnes of coal annually and consumed about 1.5 million short tonnes, making it a net importer.[232] The country plans to increase hard-coal production to 5 million tons in 2012 from 2 million tons in November 2008.[233]
The main steel mills are located in Isfahan and Khuzestan. Iran became self-sufficient in steel in 2009.[234] Aluminum and copper production are projected to hit 245,000 and 383,000 tons respectively by March 2009.[233][235] Cement production reached 65 million tons in 2009, exporting to 40 countries.[235][236]
Iran manufactures 60–70% of its equipment domestically, including refineries, oil tankers, drilling rigs, offshore platforms, and exploration instruments.[237][238][239][240]
Based on a fertilizer plant in Shiraz, the world's largest ethylene unit, in Asalouyeh, and the completion of other special economic zone projects, Iran's exports in petrochemicals reached $5.5 billion in 2007, $9 billion in 2008 and $7.6 billion during the first ten months of the Iranian calendar year 2010.[241]National Petrochemical Company's output capacity will increase to over 100 million tpa by 2015 from an estimated 50 million tpa in 2010 thus becoming the world' second largest chemical producer globally after Dow Chemical with Iran housing some of the world's largest chemical complexes.[107]
In November 2019, Iran raised the gasoline prices by 50% and imposed a strict rationing system again, as in 2007. The prices per liter gasoline rose to 15,000 rials, where only 60 liters were permitted to private cars for a month. Besides, oil purchase beyond the limit would cost 30,000 rials per liter. Those prices are still well below target prices set in the subsidy reform plan, however. The policy changes came in effect to the US sanctions, and caused protests across the country.[244] The result of the rationing, a year later, was reduced pollution and wasteful domestic consumption and increase in exports.[245]
Despite 1990s efforts towards economic liberalization, government spending, including expenditure by quasi-governmental foundations, remains high. Estimates of service sector spending in Iran are regularly more than two-fifths of GDP, much government-related, including military expenditures, government salaries, and social security disbursements.[37] Urbanization contributed to service sector growth. Important service industries include public services (including education), commerce, personal services, professional services and tourism.
The total value of transport and communications is expected to rise to $46 billion in nominal terms by 2013, representing 6.8% of Iran's GDP.[246] Projections based on 1996 employment figures compiled for the International Labour Organization suggest that Iran's transport and communications sector employed 3.4 million people, or 20.5% of the labor force in 2008.[246]
Iran has been a major oil exporter since 1913. The country's major oil fields lie in the central and southwestern parts of the western Zagros mountains. Oil is also found in northern Iran and in the Persian Gulf. In 1978, Iran was the fourth largest oil producer, OPEC's second largest oil producer and second largest exporter.[250] Following the 1979 revolution the new government reduced production. A further decline in production occurred as result of damage to oil facilities during the Iraq-Iran war.[251]
Oil production rose in the late 1980s as pipelines were repaired and new Gulf fields exploited. By 2004, annual oil production reached 1.4 billion barrels producing a net profit of $50 billion.[252] Iranian Central Bank data show a declining trend in the share of Iranian exports from oil-products (FY 2006: 84.9%, 2007/2008: 86.5%, 2008/2009: 85.5%, 2009/2010: 79.8%, FY 2010 (first three quarters): 78.9%).[253] Iranian officials estimate that Iran's annual oil and gas revenues could reach $250 billion by 2015 once current projects come on stream.[101]
Iran's retail industry consists largely of cooperatives (many of them government-sponsored), and independent retailers operating in bazaars. The bulk of food sales occur at street markets with prices set by the Chief Statistics Bureau. Iran has 438,478 small grocery retailers.[258] These are especially popular in cities other than Tehran where the number of hypermarkets and supermarkets is still very limited. More mini-markets and supermarkets are emerging, mostly independent operations. The biggest chainstores are state-owned Etka, Refah, Shahrvand and Hyperstar Market.[258]Electronic commerce in Iran passed the $1 billion mark in 2009.[259]
The constitution entitles Iranians to basic health care. By 2008, 73% of Iranians were covered by the voluntary national health insurance system.[262] Although over 85% of the population use an insurance system to cover their drug expenses, the government heavily subsidizes pharmaceutical production/importation. The total market value of Iran's health and medical sector was $24 billion in 2002 and was forecast to rise to $50 billion by 2013.[263][264] In 2006, 55 pharmaceutical companies in Iran produced 96% (quantitatively) of the medicines for a market worth $1.2 billion.[262][265][266] This figure is projected to increase to $3.65 billion by 2013.[264]
Although tourism declined significantly during the war with Iraq, it has subsequently recovered. About 1,659,000 foreign tourists visited Iran in 2004 and 2.3 million in 2009 mostly from Asian countries, including the republics of Central Asia, while about 10% came from the European Union and North America.[73][267]
The most popular tourist destinations are Mazandaran, Isfahan, Mashhad and Shiraz.[268] In the early 2000s the industry faced serious limitations in infrastructure, communications, industry standards and personnel training.[190] Several organized tours from Germany, France and other European countries come to Iran annually to visit archaeological sites and monuments. In 2003 Iran ranked 68th in tourism revenues worldwide.[269] According to UNESCO and the deputy head of research for Iran Travel and Tourism Organization (ITTO), Iran is rated among the "10 most touristic countries in the world".[269]Domestic tourism in Iran is one of the largest in the world.[270]
Government loans and credits are available to industrial and agricultural projects, primarily through banks. Iran's unit of currency is the rial which had an average official exchange rate of 9,326 rials to the U.S. dollar in 2007.[37] Rials are exchanged on the unofficial market at a higher rate. In 1979, the government nationalized private banks. The restructured banking system replaced interest on loans with handling fees, in accordance with Islamic law. This system took effect in the mid-1980s.[53]
The banking system consists of a central bank, the Bank Markazi, which issues currency and oversees all state and private banks. Several commercial banks have branches throughout the country. Two development banks exist and a housing bank specializes in home mortgages. The government began to privatize the banking sector in 2001 when licenses were issued to two new privately owned banks.[273]
State-owned commercial banks predominantly make loans to the state, bonyad enterprises, large-scale private firms and four thousand wealthy/connected individuals.[274][275] While most Iranians have difficulty obtaining small home loans, 90 individuals secured facilities totaling $8 billion.[citation needed] In 2009, Iran's General Inspection Office announced that Iranian banks held some $38 billion of delinquent loans, with capital of only $20 billion.[citation needed]
Foreign transactions with Iran amounted to $150 billion of major contracts between 2000 and 2007, including private and government lines of credit.[276] In 2007, Iran had $62 billion in assets abroad.[277] In 2010, Iran attracted almost $11.9 billion from abroad, of which $3.6 billion was FDI, $7.4 billion was from international commercial bank loans, and around $900 million consisted of loans and projects from international development banks.[278]
As of 2010, the Tehran Stock Exchange traded the shares of more than 330 registered companies.[272] Listed companies were valued at $100 billion in 2011.[279]
Insurance premiums accounted for just under 1% of GDP in 2008,[232] a figure partly attributable to low average income per head.[232] Five state-owned insurance firms dominate the market, four of which are active in commercial insurance. The leading player is the Iran Insurance Company, followed by Asia, Alborz and Dana insurances. In 2001/02 third-party liability insurance accounted for 46% of premiums, followed by health insurance (13%), fire insurance (10%) and life insurance (9.9%).[273]
Broadcast media, including five national radio stations and five national television networks as well as dozens of local radio and television stations are run by the government. In 2008, there were 345 telephone lines and 106 personal computers for every 1,000 residents.[280] Personal computers for home use became more affordable in the mid-1990s, since when demand for Internet access has increased rapidly. As of 2010, Iran also had the world's third largest number of bloggers (2010).[281]
In 1998, the Ministry of Post, Telegraph & Telephone, later renamed the Ministry of Information & Communication Technology, began selling Internet accounts to the general public. In 2006, revenues from the Iranian telecom industry were estimated at $1.2 billion.[282] In 2006, Iran had 1,223 Internet Service Providers (ISPs), all private sector operated.[283] As of 2014, Iran has the largest mobile market in the Middle East, with 83.2 million mobile subscriptions and 8 million smart-phones in 2012.[284]
According to the World Bank, Iran's information and communications technology sector had a 1.4% share of GDP in 2008.[280] Around 150,000 people work in this sector, including 20,000 in the software industry.[285] 1,200 IT companies were registered in 2002, 200 in software development. In 2014 software exports stood at $400 million.[citation needed] By the end of 2009, Iran's telecom market was the fourth-largest in the Middle East at $9.2 billion and was expected to reach $12.9 billion by 2014 at a compound annual growth rate of 6.9%.[286]
Iran has an extensive paved road system linking most towns and all cities. In 2011, the country had 173,000 kilometres (107,000 mi) of roads, of which 73% were paved. In 2007 there were approximately 100 passenger cars for every 1,000 inhabitants.[207] Trains operated on 11,106 kilometres (6,901 mi) of track.[37]
Dozens of cities have passenger and cargo airports. Iran Air, the national airline, was founded in 1962 and operates domestic and international flights. All large cities have bus transit systems and private companies provide intercity bus services. Tehran, Mashhad, Shiraz, Tabriz, Ahvaz and Isfahan are constructing underground railways. More than one million people work in the transportation sector, accounting for 9% of 2008 GDP.[287]
In August 2022, President Ebrahim Raisi's cabinet approved a law to import fully assembled foreign cars. His predecessor President Hassan Rouhani, had outlawed such imports in July 2018 due to sanctions imposed on Iran. Regular Iranian citizens were unable to buy safe cars at affordable prices.[288]
Technical and engineering service exports in FY 2007 were $2.7 billion of which 40% of technical services went to Central Asia and the Caucasus, 30% ($350 million) to Iraq, and close to 20% ($205 million) to Africa.[292]Iranian firms have developed energy, pipelines, irrigation, dams and power generation in different countries. The country has made non-oil exports a priority[91] by expanding its broad industrial base, educated and motivated workforce and favorable location, which gives it proximity to an estimated market of some 300 million people in Caspian, Persian Gulf and some ECO countries further east.[293][294]
Total import volume rose by 189% from $13.7 billion in 2000 to $39.7 billion in 2005 and $55.189 billion in 2009.[295] Iran's major commercial partners are China, France, Germany, India, Italy, Japan, Russia, and South Korea. From 1950 until 1978, the United States was Iran's foremost economic and military partner, playing a major role in infrastructure and industry modernization.[54][55] It is reported that around 80% of machinery and equipment in Iran is of German origin.[296]
In March 2018, Iran had banned Dollar in trade.[297] In July 2018, France, Germany and the UK agreed to continue trade with Iran without using Dollar as a medium of exchange.[298]
Since the mid-1990s, Iran has increased its economic cooperation with other developing countries in "South–South integration" including Syria, India, China, South Africa, Cuba, and Venezuela. Iran's trade with India passed $13 billion in 2007, an 80% increase within a year.[citation needed] Iran is expanding its trade ties with Turkey and Pakistan and shares with its partners the common objective to create a common market in West and Central Asia through ECO.[citation needed]
Since 2003, Iran has increased investment in neighboring countries such as Iraq and Afghanistan. In Dubai, UAE, it is estimated that Iranian expatriates handle over 20% of its domestic economy and account for an equal proportion of its population.[300][301] Migrant Iranian workers abroad remitted less than $2 billion home in 2006.[302] Between 2005 and 2009, trade between Dubai and Iran tripled to $12 billion; money invested in the local real estate market and import-export businesses, collectively known as the Bazaar, and geared towards providing Iran and other countries with required consumer goods.[303] It is estimated that one third of Iran's imported goods and exports are delivered through the black market, underground economy, and illegal jetties, thus damaging the economy.[151]
In the 1990s and early 2000s, indirect oilfield development agreements were made with foreign firms, including buyback contracts in the oil sector whereby the contractor provided project finance in return for an allocated production share. Operation transferred to National Iranian Oil Company (NIOC) after a set number of years, completing the contract.[304]
Unfavorable or complex operating requirements and international sanctions have hindered foreign investment in the country, despite liberalization of relevant regulations in the early 2000s. Iran absorbed $24.3 billion of foreign investment between the Iranian calendar years 1993 and 2007.[305] The EIU estimates that Iran's net FDI will rise by 100% between 2010 and 2014.[306]
Foreign investors concentrated their activities in the energy, vehicle manufacture, copper mining, construction, utilities, petrochemicals, clothing, food and beverages, telecom and pharmaceuticals sectors. Iran is a member of the World Bank's Multilateral Investment Guarantee Agency.[307] In 2006, the combined net worth of Iranian citizens abroad was about 1.3 trillion dollars.[308]
According to the head of the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI), in 2008 Iran ranked 142 among 181 countries in working conditions. Iran stands at number 96 in terms of business start-ups, 165 in obtaining permits, 147 in employment, 147 in asset registration, 84 in obtaining credit, 164 in legal support for investments, 104 in tax payments, 142 in overseas trade, 56 in contract feasibility and 107 in bankruptcy.[309] Firms from over 50 countries invested in Iran between 1992 and 2008, with Asia and Europe the largest participants as shown below:[310]
Continent of origin
Leading countries investing in Iran (1992–2008)
Number of projects
Total amount invested
Asia
India, United Arab Emirates (UAE), Singapore, Indonesia and Oman
190
$11.6 billion
Europe
Germany, the Netherlands, Spain, UK, Turkey, Italy and France (20 countries in total)
253
$10.9 billion
Americas
Canada, Panama, the US and Jamaica
7
$1.4 billion
Africa
Mauritius, Liberia and South Africa
—
$8 billion
Australia
Australia
1
$682 million
The economic impact of a partial lifting of sanctions extends beyond the energy sector; The New York Times reported that "consumer-oriented companies, in particular, could find opportunity in this country with 81 million consumers, many of whom are young and prefer Western products".[311] The consumer-goods market is expected to grow by $100 billion by 2020.[312]
In 2015, Iran was considered "a strong emerging market play" by investment and trading firms.[313] Opening Iran's market place to foreign investment could also be a boon to competitive multinational firms operating in a variety of manufacturing and service sectors, worth $600 billion to $800 billion in new investment opportunities over the next decade.[314][315][316][317]
Iran has held observer status at the World Trade Organization (WTO) since 2005. Although the United States has consistently blocked its bid to join the organization, observer status came in a goodwill gesture to ease nuclear negotiations between Iran and the international community.[318] With exports of 60 products with revealed comparative advantage, Iran is the 65th "most complex country".[319]
Should Iran eventually gain membership status in the WTO, among other prerequisites, copyrights will have to be enforced in the country. This will require a major overhaul. The country is hoping to attract billions of dollars' worth of foreign investment by creating a more favorable investment climate through freer trade. Free trade zones such as Qeshm, Chabahar, and Kish Island are expected to assist in this process. Iran allocated $20 billion in 2010 to loans for the launch of twenty trade centers in other countries.[320]
According to U.S. Undersecretary of State William J. Burns, Iran may be losing as much as $60 billion annually in energy investment.[332] Sanctions are making imports 24% more costly on average.[333] In addition, the latest round of sanctions could cost Iran annually $50 billion in lost oil revenues.[334] Iran is increasingly using barter trade because its access to the international dollar payment system has been denied. According to Iranian officials, large-scale withdrawal by international companies represents an "opportunity" for domestic companies to replace them.[335][336]
The IEA estimated that Iranian exports fell to a record of 860,000 bpd in September 2012 from 2.2 million bpd at the end of 2011. This fall led to a drop in revenues and clashes on the streets of Tehran when the local currency, the rial, collapsed. September 2012 output was Iran's lowest since 1988.[337]
The economic impacts of sanctions have been severe. Based on research, the sanctions resulted in welfare losses across all income groups in Iran, with wealthier groups suffering greater losses compared to poorer groups.[338][339] Additionally, income concentration and share within top income groups declined post-sanctions.[340]
According to the U.S. Iran could reduce the world price of crude petroleum by 10%, saving the United States annually $76 billion (at the proximate 2008 world oil price of $100/bbl).[315]
According to NIAC, sanctions cost the United States over $175 billion in lost trade and 279,000 lost job opportunities.[341] Between 2010 and 2012, sanctions cost the E.U. states more than twice as much as the United States in terms of lost trade revenue. Germany was hit the hardest, losing between $23.1 and $73.0 billion between 2010–2012, with Italy and France following at $13.6-$42.8 billion and $10.9-$34.2 billion respectively.[341]
GDP growth turned negative in 2013 (−5%). The unofficial unemployment rate was 20% by mid-2012. Oil exports dropped to 1.4 million bpd in 2014 from 2.5 million bpd in 2011. By 2013, Iran had $80 billion in foreign exchange reserves frozen overseas. Automobile production declined 40% between 2011 and 2013.[342] According to the U.S. government in 2015, Iran's economy has reached a point where it is "fundamentally incapable of recovery" without a nuclear accommodation with the West.[343]
The tentative rapprochement between Iran and the US, which began in the second half of 2013, has the potential to become a world-changing development, and unleash tremendous geopolitical and economic opportunities, if it is sustained […] if Iran and the US were to achieve a diplomatic breakthrough, geopolitical tensions in the Middle East could decline sharply, and Iran could come to be perceived as a promising emerging market in its own right.[344]
In January 2019, President Hassan Rouhani blamed the US for Iran's declining economy. Following the US pullout from an international nuclear deal with Iran and re-imposed sanctions, Iran faced the toughest economic situation in 40 years.[345] According to Majlis, this has caused damages estimated between 150 and 200 billion dollars to the Iranian economy.[346]
In August 2024, an Iranian group called IRLeaks attacked Iranian banks. Politico described the attack as the “worst cyberattack” in Iranian history.[347][348] According to Politico, the Iranian government was forced to pay millions of dollars to IRLeaks in ransom.[347] Politico reported that 20 out of about 29 Iranian credit institutions fell in the attack.[349][350][347] The Iranian supreme leader blamed Israel and the United States without mentioning the cyberattack on the banking system. Politico remarked it was plausible Israel or the US were involved because of tensions with Israel as well as the Americans having accused Iran of intervening in the American 2024 elections.[351][352] Politico also remarked that the group was made of freelance hackers and the attack was likely carried out for monetary gain.[353] TechCentral said the attack was probably carried out by freelance hackers.[354] An Iranian firm paid the hackers no less than $3 million to IRLeaks to stop the attack and retrieve data.[353]
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(in English)Central Bank of IranArchived November 24, 2020, at the Wayback Machine – Detailed statistics about Iran's economy and sectors, including national accounts and annual reviews
AustradeArchived October 2, 2016, at the Wayback Machine – Iran Profile (Many practical information and sector specific reports, with useful websites and resources. Login required for sector reports)
American Enterprise Institute – Global Investment in Iran (Indicative list of major international companies investing in Iran broken down by their nationality, sector of activity and amount invested)
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