Economy of Iran

Iran has a developing mixed economy that is centrally planned through its large public sector. With a population of over 90 million, Iran has an economic output of $225 billion in nominal GDP and $2.18 trillion as measured by purchasing power parity (PPP) as of 2026. Its energy sector is home to 10% of the world's proven oil reserves and 15% of its gas reserves,

Since the 1979 Islamic revolution, the Iranian economy has experienced slower economic growth, high inflation, and recurring crises. A variety of armed conflicts in the region – as well as foreign interventions – have exacerbated economic pressures from 1980s to the 2020s. The nation has experienced varied levels of "brain drain" due to Iranians seeking overseas employment. Inflation in Iran has been persistent and caused mass protests.

The nation's nuclear program and foreign policy have placed Iran under sustained international sanctions, deterring foreign and domestic investment with adverse humanitarian impact. The periodic lifting of these sanctions have supported an emerging tourism industry. Its official currency, the Iranian rial, has fallen significantly since the 2010s, leading to mass protests over its purchasing power. Iran maintains low international rankings on economic freedom and "ease of doing business".

History until 1979

150px|left|thumb|Persian [[Achaemenid gold coin, circa 490 BC]]

In 546 BC, Croesus of Lydia was defeated and captured by the Persians, who then adopted gold as the main metal for their coins. 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. The bank continued its activities under the name of Bank Iran until 1933 when incorporating the newly founded Keshavarzi Bank.

Following the nationalizations in 1979 and the outbreak of the Iran–Iraq War, over 80% of the economy came under government control. 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.

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.

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. 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. Contraband, administrative controls, widespread corruption, and other restrictive factors undermine private sector-led growth. Most of Iran's exports are oil and gas, accounting for a majority of government revenue in 2010. 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. Also in March 2022, 20 billion tons of basic goods exports from Russia including vegetable oil, wheat, barley and corn were agreed. However, following expansion of international sanctions related to Iran's nuclear programme, the Iranian rial fell to a record low of 23,900 to the US dollar in September 2012.

2025 was marked by a collapsing currency, surging inflation causing widespread unrest. The Iranian rial plummeted to record lows, trading well above one million rials to the U.S. dollar, contributing to inflation rates exceeding 40% and sharply rising prices for basic commodities, causing hardships and nationwide protests. By December 2025, the rial weakened to roughly 1.3–1.5 million per U.S. dollar on open markets, imposing heavy pressure on domestic prices and living standards. Inflation surged with annual inflation in 2025 reaching or exceeding the 40% range, with food and essential goods prices in some cases climbing by 50% or more.

In late December 2025, the government replaced the head of the Central Bank of Iran in an attempt to steady the economy. By early 2026, the crisis had contributed to significant social strain. Official data for January 2026 indicated monthly inflation around 8% overall and nearly 14% for food and beverages. Food inflation alone approached roughly 90% year-on-year. Annual inflation also rose further to about 44.6% in January 2026.

The Twelve-Day War with Israel in June 2025 had a profound short-term impact on Iran's economy. The economic toll was significant: Iran's oil exports plunged by 94% during the war, dropping from about 1.7 million barrels per day to barely 100,000, due to damage and fear of tanker transit in the Persian Gulf. On the other side, Israeli and U.S. strikes caused billions in physical damage: dozens of military facilities, communication centers, and at least 120 residential buildings in Tehran were destroyed or severely damaged. After 12 days, Iran agreed to a ceasefire; an Iranian MP on parliament's economic commission admitted Iran's economy "lacks the resilience for a decisive battle" and that the financial strain was a key reason Iran could not prolong the war. The war's aftermath brought even tighter U.S. sanctions. Enforcement on oil smuggling was intensified by Western navies. The currency, which had plunged during the conflict, remained very weak (around 1.3 million rials per USD by mid-late 2025).

File:Provinces of Iran by contribution to national GDP.svg|The Provinces of Iran by their contribution to national GDP, 2014

File:Socio-eco expenditures IRAN.jpg|Socioeconomic expenditures, 2004

File:GDP_per_capita_development_in_Iran.svg|Historical GDP per capita development in Iran, 1820–2018

File:Irecosector.gif|Economic sectors, 2002

File:Inflation Iran CPI.jpg|Inflation rate, 1980–2010

File:Iran market liquidity.png|Market liquidity, 2012

File:IRAN CPI broad money FXreserves.jpg|CPI, broad money and foreign exchange reserves, 2000–2011

File:USD-IRR exchange rate.JPG|US dollar/Iranian rial exchange rate, 2003–2014 est.

File:Debt service-Iran.png|Debt service, 1980–2000

File:IRANbalanceofpayment.jpg|Balance of payment, 2003–2007

File:TEPIXvsDJIA.png|TEPIX vs DJIA and oil prices, 2000–2009

File:Oil Production and Consumption.gif|Oil production and consumption, 1977–2010

File:IRAN oil&gas production.jpg|Oil and gas production, 1970–2030 est.

</gallery>

Macroeconomic trends

thumb|[[Nominal price of oil from 1861 to 2020 from Our World in Data ]]

Iran's national science budget in 2005 was about $900 million, roughly equivalent to the 1990 figure. 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%. In 2009 the ratio of research to GDP was 0.87% against the government's medium-term target of 2.5%. Iran ranked first in scientific growth in the world in 2011 and 17th in science production in 2012. Iran has a broad and diversified industrial base.

According to The Economist, Iran ranked 39th in a list of industrialized nations, producing $23 billion of industrial products in 2008. Between 2008 and 2009 Iran moved to 28th from 69th place in annual industrial production growth because of its relative isolation from the 2008 financial crisis and because the price of oil reached an alltime high in the first half of 2008. In the early 21st century the service sector was Iran's largest, followed by industry (mining and manufacturing) and agriculture.

Iran's long-term economic growth since the 1979 Islamic Revolution has been far below its pre-revolution performance. According to Central Bank data, GDP grew on average only about 1.9% per year from 1979 to 2020, compared to 9.1% annually in 1960–1979 before the revolution.

The Iran–Iraq War (1980–88) caused a deep recession: during 1981–89 Iran's GDP grew only 0.9% annually on average, the lowest of any period, as war destruction and revolutionary upheaval crippled output. 2025 was worse: after new U.S. sanctions and the mid-2025 conflict, the IMF projected near zero growth (0.3%) for 2025, revising down earlier forecasts. Oil production and exports have been constrained by sanctions and the 2025 war damage; Iran's oil exports, which averaged ~1.4–1.7 million barrels/day in 2024, were expected to drop by several hundred thousand barrels in 2025 under sanctions.

According to the IMF estimations, in 2026 Iran’s economy is roughly one-fifth the size of Saudi Arabia and Turkey, less than half the size of the UAE and Israel, and it is about 20% smaller than Kazakhstan’s economy.<div class="floatright"></div>

thumb|300px|right|Changes in [[population of Iran]]

{|style="margin:1em; background:#f9f9f9; border:1px #aaa solid; border-collapse:collapse; font-size:90%;"

|- style="background:lightblue;"

! Year (Source: IMF) ||GDP, current prices (billions IRR)|| Implied PPP conversion rate (USD/IRR)|| GDP per capita, PPP (current international dollar)|| Inflation index (average CPI) (2011/2012=100)|| Current account balance (billions US dollars) || Population (million persons)

| 1980 || style="text-align:right;"|6,622 ||align="right"| 40 ||align="right"| 4,267 ||align="right"| 0.5 || style="text-align:right;"| -3.6 ||style="text-align:center;"| 38

| 1985 ||align="right"| 16,556 ||align="right"| 53 ||align="right"| 6,469 ||align="right"| 0.9 ||align="right"| -0.9 || style="text-align:center;"| 48

| 1990 ||align="right"| 35,315 ||align="right"| 101 ||align="right"| 6,410 ||align="right"| 2.5 || style="text-align:right;"| -2.7 ||style="text-align:center;"| 55

| 1995 ||align="right"| 185,928 ||align="right"| 399 ||align="right"| 7,265 ||align="right"| 9 ||align="right"| 3.4 || style="text-align:center;"| 64

| 2000 ||align="right"| 580,473 ||align="right"| 940 ||align="right"| 9,666 ||align="right"| 21 ||align="right"| 12.5|| style="text-align:center;"| 64

| 2005 ||align="right"| 1,831,739 ||align="right"| 2,025 ||align="right"| 13,036 ||align="right"| 40||align="right"| 15.4 || style="text-align:center;"| 69

| 2010 ||align="right"| 4,333,088 ||align="right"| 3,498 ||align="right"| 16,664 ||align="right"| 82 ||align="right"| 27.3|| style="text-align:center;"| 74

| 2015 (est.) ||align="right"| 13,077,142 ||align="right"| 9,788 ||align="right"| 16,918 ||align="right"| 253 ||align="right"| 6.9 || style="text-align:center;"| 79

Reform plan

Before 2010, Expansion of public healthcare and international relations were the other main objectives of the fifth plan, an ambitious series of measures that included subsidy reform, banking recapitalization, currency, taxation, customs, construction, employment, nationwide goods and services distribution, social justice and productivity.

The intent was to make the country self-sufficient by 2015 and replace the payment of $100 billion in subsidies annually with targeted social assistance. These reforms target Iran's major sources of inefficiency and price distortion and are likely to lead to major restructuring of almost all economic sectors. By 2016, one third of Iran's economic growth was 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. Notwithstanding its own issues, the banking sector was seen (2010) as a potential hedge against the removal of subsidies, as the plan is not expected to directly impact banks.

National planning

Iran's budget is established by the Management and Planning Organization of Iran and proposed by the government to the parliament before the year's end. Following approval of the budget by Majlis, the central bank presents a detailed monetary and credit policy to the Money and Credit Council (MCC) for approval. Thereafter, major elements of these policies are incorporated into the five-year economic development plan. The plan is part of "Vision 2025", a strategy for long-term sustainable growth.

{| style="margin:1em; background:#f9f9f9; border:1px #aaa solid; border-collapse:collapse; font-size:90%; float:left;"

|- style="background:lightblue;"

|+ Fifth Economic Development Plan (2010–15)

! Item!! 2010 (achieved) !!2010–15 (target)

| GDP world ranking || 18th largest economy by PPP ||12th in 2015

| Annual growth rate || 2.6% || 8% on average (based on $1.1 trillion domestic and FDI); BMI forecast: 3.6% on average (2009–14)

| Unemployment || 11.8% according to government; unofficially: 12–22%; 30% according to opposition|| 7% by 2015, by creating 1 million new jobs each year

|Privatization|| || 20% of state-owned firms to be privatized each year

| Share of cooperative sector (% GDP) || < 5% || 25%

| R&D (% GDP) || 0.87% || 2.5%

| Oil price & revenues in budget || $60 per barrel || $65 per barrel on average

| National Development Fund || || 30% of oil revenues to be allocated to the National Development Fund by 2015

| Oil production || 4.1 million bpd || 5.2 million bpd (with some 2,500 oil and gas wells to be drilled and commissioned)

| Natural gas production|| || 900 million cubic meter/day

| R&D projects in oil industry|| ||Implementation of 380 research projects by 2015 covering the enhancement of the recovery rate, gas conversion and hydro conversion

| Investment in oil and gas industry|| || $20 billion a year in private and foreign investment, in part to boost oil refining capacity

| Petrochemical output || ~50 million tpy || 100 million tpy

| Bunkering || 25% market share in Persian Gulf || 50% market share or 7.5 million tpy of liquid fuel

| Oil products storage capacity || 11.5 billion liters || 16.7 billion liters

| Natural gas storage capacity || || 14 billion cubic meters

| Electricity generation capacity || 61,000 MW || 86,000 MW

| Efficiency of power plants || 38% || 45%

| Investment in mining and industry|| || $70 billion / 700,000 billion rials

|Crude steel production || ~10 million tpy || 42 million tpy by 2015

|Ports capacity||150 million tons|| 200 million tons

|Railways||10,000 kilometers|| 15,000 kilometers by 2015 at a cost of $8 billion per annum

|Electronic trade|||| 20% of domestic trade, 30% of foreign trade and 80% of government transactions to be made electronically

Fiscal policy

Since the 1979 revolution, government spending has averaged 59% on social policies, 17% on economic matters, 15% on national defense, and 13% on general affairs.

In 2008, around 55% of government revenue came from oil and natural gas revenue, with 31% from taxes and fees. There are virtually millions of people who do not pay taxes in Iran and hence operate outside the formal economy. The budget is based on an oil price of $85 per barrel. The value of the US dollar is estimated at IRR 12,260 for the same period. The central bank's interest rate is 21%, and the inflation rate has climbed to 22% in 2012, 10% higher than in 2011. There is little alignment between fiscal and monetary policy. According to the Central Bank of Iran, the gap between the rich and the poor narrowed because of monthly subsidies but the trend could reverse if high inflation persists.

thumb|Iran Ministry of Defense New Weapons Ceremony and Young Soldier Festival

According to official data, as of 2023 Iran spends 10.3 billion USD or 2.1% of its GDP on national defense. This percentage is similar to that in other countries such as UK, France and Finland. In 2025, the Iranian budget bill granted 51% of the total oil and gas export revenues, estimated at 12 billion euros, to the Islamic Revolutionary Guard Corps (IRGC) and the Law Enforcement Command (LEF).

Iran also finances Hezbollah, the Yemeni Houthis, Iraqi militia, and Hamas. The average annual budget reserved for the funding of Iran's proxies is estimated at US$1.6 billion. According to Syrian opposition sources, starting from the beginning of 2011, Iran allocated a total of US$50 billion to maintain the Assad regime in Syria. However, this investment proved to be a failure following the eventual collapse of the regime.

The most costly of Iran's defense expenditures is its nuclear program. The estimated total cost of Iran's nuclear program until 2025 approaches US$500 billion. As a result of its nuclear program Iran is subject to international sanctions, causing a long-term economic stagnation which cost Iran an additional US$1.2 trillion over 12 years. Furthermore, the sanctions led to a significant decline in foreign direct investments (FDI), with Iran experiencing a reduction of approximately 80% in FDI between 2011 and 2021.

Inflation

thumb|Iran inflation

Inflation in Iran has been persistently high since the revolution, eroding living standards. During 1960–1978, Iran's inflation was usually in single digits, but after 1979 it surged into double digits almost every year. From 1979 to 2024, consumer prices increased astronomically – an item that cost 100 rials in 1960 costs over 2 million rials by 2025. The average inflation rate since 1979 has been about 17–18% per year, compared to under 10% before 1979. By 2023–2024, Iran's annual inflation was roughly 40%, particularly elevated for food prices, which led to steep declines in real incomes. In 2025, amid renewed sanctions and war disruption, the IMF raised Iran's projected inflation to over 43%, placing Iran as the 4th-highest inflation country globally (after Venezuela, Sudan, Zimbabwe). The latest data shows that the annual inflation rate reached 38.7% in May 2025. Due to the high inflation and the devaluation of the Iranian real (90% since 2018)

As of April 2026, the IMF forecasts that the inflation in Iran will hit 69%.

Public finances

Iran had an estimated $110 billion in foreign reserves in 2011 and balances its external payments by pricing oil at approximately $75 per barrel. As of 2013, only $30 to $50 billion of those reserves are accessible because of current sanctions. 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. In 2013 the external debts stood at $7.2 billion down from $17.3 billion in 2012. Overall fiscal deficit is expected to deteriorate to 2.7% of GDP in FY 2016 from 1.7% in 2015. Money in circulation reached $700 billion in March 2020 (based on the 2017 pre-devaluation exchange rate), thus furthering the decline of the Iranian rial and rise in inflation.

The Iranian rial

The Iranian rial has continually lost value, especially since the 2010s. The currency was roughly 70 rials per US dollar before 1979; after the revolution and war, it fell to ~1,700 rials/USD by 1990s, and kept sliding. Following the U.S. withdrawal from the nuclear deal (2018) and sanctions, the rial's decline accelerated: the free-market exchange rate crossed 300,000 rials/USD in 2020, then 600,000 by late 2022, and hit 1,000,000 rials per USD in early 2025 – a psychological milestone of 1 million. Authorities periodically attempted currency reforms, e.g., banning exchange shops, unifying rates, or proposing to cut four zeros from the currency, but the underlying pressures of limited foreign exchange and excess money supply have kept the rial weak. By 2025, Iran's currency and inflation problems were severe enough that even basic goods saw rapid price rises, sparking protests over living costs. Subsidy reforms led to jumps in prices of staples like bread and medicine.

The stock market

Iran's stock market, the Tehran Stock Exchange (TSE), has experienced boom-and-bust cycles in recent years, often moving opposite to the real economy. During recessions and currency devaluation, many Iranians invested in stocks as a hedge against inflation, fueling speculative rallies. In 2019–2020, amid U.S. "maximum pressure" sanctions and a recession, the TSE index surged by over 500% within a year. By late 2020 and into 2021, the bubble burst – the market crashed over 30% from its peak by early 2021, wiping out many small investors' savings. Allegations emerged that government insiders had benefited from selling at highs, causing public mistrust.

Structural issues, such as lack of market depth, high inflation, and political risks, continue to make Iran's stock market volatile. Following the war, analysts argued that without genuine government support (e.g. large capital injections like those used to stabilize the currency), the market downturn could deepen, as the war's aftermath and ongoing sanctions deter both local and foreign investors.

Ownership

Following the hostilities with Iraq, the Government declared its intention to privatize most industries and to liberalize and decentralize the economy. 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. 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%.

In 2005 government assets were estimated at $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%. Many companies in Iran remain uncompetitive because of mismanagement over the years, thus making privatization less attractive for potential investors. According to then-President Mahmoud Ahmadinejad, 60% of Iran's wealth is controlled by just 300 people.

Islamic Revolutionary Guard Corps

The Islamic Revolutionary Guard Corps (IRGC) are thought to control about one third of Iran's economy through subsidiaries and trusts. 2007 estimates by the Los Angeles Times suggest the IRGC has ties to over one hundred companies and annual revenue in excess of $12 billion, particularly in construction. The Ministry of Petroleum awarded the IRGC billions of dollars in no-bid contracts as well as major infrastructure projects.

Tasked with border control, the IRGC maintains a monopoly on smuggling, costing Iranian companies billions of dollars each year.

Religious foundations

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. 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.

Bonyad companies compete with Iran's unprotected private sector, whose firms complain of the difficulty of competing with the subsidized bonyads. 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, Mojtaba Khamenei, and created from thousands of properties confiscated from Iranians.

Labor force

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%. The Human Development Index was 0.749 in 2013, placing Iran in the "high human development" bracket.

In 2008 annual economic growth of above 5% was necessary to absorb the 750,000 new labor force entrants each year. In 2020, agriculture was 10% of GDP and employed 16% of the labor force. In 2017, the industrial sector, which includes mining, manufacturing, and construction, was 35% of GDP and employed 35% of the labor force. Youth unemployment, aged 15–24, was 29.1% in 2012, resulting in significant brain drain. In 2016, according to the government, some 40% of the workforce in the public sector are either in excess or incompetent.

As of April 2026 more than a million people out of work.

Labor force and the public sector

The Islamic Republic of Iran employs around 8 million individuals, of whom roughly 3 million hold formal positions within the three branches of government, the armed forces, and leadership institutions. These roles encompass bureaucratic staff, civil servants, and uniformed military personnel.

Beyond the formal government structure, approximately 2.3 million individuals are employed in quasi-governmental organizations, including state-owned enterprises, national banks, municipalities, and the Islamic Azad University. Additionally, about 2.5 million pensioners receive state stipends, often distributed through the Relief Committee, a government-controlled charitable organization. As a result, nearly one in ten Iranian citizens maintain a regular financial connection to the state. Youth unemployment is much higher: for ages 18–35 it was around 15%, and for 15–24 year-olds about 20% in 2024–25 (with young women's jobless rate even higher, near 35%).

Personal income

thumb|Unemployment rate, per-capita income growth and minimum wage, 2000–2009

thumb|283px|[[List of countries by GNI (nominal, Atlas method) per capita|GNI per capita: