Iran, Islamic Republic of

Iran, Islamic Republic of

Population 84.8 million
GDP 18,739 US$
Country risk assessment
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major macro economic indicators

  2020 2021 2022 2023 (e) 2024 (f)
GDP growth (%) 3.3 4.7 2.5 2.0 2.0
Inflation (yearly average, %) 36.4 40.1 49.0 45.0 40.0
Budget balance (% GDP) -5.8 -4.2 -4.0 -6.0 -6.5
Current account balance (% GDP) -0.4 3.9 4.7 2.0 1.8
Public debt (% GDP) 48.3 42.4 34.0 32.0 33.0

(e): Estimate (f): Forecast *March 21, 2022 – March 20, 2023 **General government gross debt


  • Second-largest proven oil and gas reserves in the world
  • Poorly penetrated, large consumer market


  • High dependence on oil and gas
  • The delayed return to the nuclear deal is restricting growth, international sanctions are weighing on trade, investment and capital flows
  • Existence of multiple exchange regimes, asset freeze abroad is hampering investment funding
  • Narrow budgetary margins
  • Restricted availability of credit for companies, weak banking system
  • High inflation, heavy bureaucracy and corruption

Risk assessment

Economic growth remains subdued, largely dependent on nuclear deal

The decline in oil prices and external competition on the oil market, primarily from Russia, will weigh on Iran’s growth. Slowdown in government consumption will drag down GDP growth as fiscal revenues from hydrocarbon sales (nearly 15% of total revenues) are persistently hampered by enduring US sanctions. By contrast, easing depreciation of the riyal (which from end-2022 until end-May 2023 lost 20% of its value against USD on the parallel market), and lower global food prices will help annual inflation to decelerate to 40% in 2024 from nearly 50% in 2022. This will result in a slight acceleration in household consumption (around 45% of GDP). Moreover, investment (35% of GDP) will gradually start to edge up in the coming period mainly thanks to the resumption in 2023 of diplomatic relations with Saudi Arabia and rising investments from Russia. The latter became Iran’s largest foreign investor in 2022 with a total investment of USD 2.76 billion. The country’s economic outlook in 2023 and 2024 will also depend on the outcome of ongoing negotiations and diplomatic efforts to revive the Iran nuclear deal. If indirect talks with the US lead to an easing of international sanctions, this could increase foreign investment and access to global markets, and subsequently improve Iran’s economic prospects. In 2024, a slight rise in oil production (9% of GDP) is expected of around 0.5% from a year earlier to 3.7 million barrels per day (as per the BMI), depending on China and other Asian countries’ demand for which Iran is in competition with Russia. Whatever the evolution in that aspect, Iran’s growth will continue to face challenges due to the need of structural reforms, under-developed private sector, high level of bureaucracy and abysmal business environment.

Narrower current account surplus, budget deficit remains wide

Iran’s current account surplus is expected to narrow in the upcoming quarters as its exports will remain under pressure due to lower energy prices, rising competition from Russia, and slow recovery in non-oil sector exports such as petrochemicals and mining products. Decline in exports will reduce the availability of foreign currency to finance imports, reducing growth of imports, including inputs integrated in exports. The traditional trade in services deficit will subsist.
The budget deficit will widen slightly due to lower oil revenues, although the authorities will try to crimp expenditures. The public sector wages, security and welfare related expenditures will continue to weigh on fiscal accounts. However, authorities’ efforts to implement spending cuts and shift project financing burden onto the private sector are expected to reduce the budget deficit in longer term. However, the process will be very gradual and slow.


Persistent risks on the political and social fronts

The first challenge is related to a return to the Iran Nuclear Deal, formally known as the Joint Comprehensive Plan of Action (JCPOA) from which the US withdrew unilaterally in May 2018. A return to the deal would appear difficult to achieve in the current global geopolitical environment despite recent indirect talks between Iran and the US. Iran's relationships (or absence thereof) with its main neighbours, particularly Saudi Arabia, Israel, Egypt, Russia, Oman, and the United Arab Emirates, will continue to shape the external landscape, as well as the future of Iraq, Lebanon, Syria, and South Caucasus. Ongoing rivalries, competition for influence, and regional power struggles could potentially heighten tensions. Conversely, establishment of closer ties with Saudi Arabia, including the reopening of their embassies, might contribute positively to regional trade. Also, following the start of the Ukraine-Russia war in February 2022, Iran-Russia relations have entered a new era of mutual cooperation on military, economic and geopolitical fronts.
Iran has experienced various waves of popular protests and violent crackdowns in recent years (most recently in 2022-2023), driven by economic hardship, social grievances and political dissent stemming from restrictions on civil liberties, repression, and dissatisfaction with government policies. Furthermore, the eventual death of Supreme Leader Ayatollah Ali Khamenei would heighten short-term political risks, especially if his successor happened to be a disappointment to the many Iranians hoping for a higher degree of political freedom.


Last updated: September 2023