2019 Index of Economic Freedom

Iran

overall score51.1
world rank155
Rule of Law

Property Rights33.5

Government Integrity35.0

Judicial Effectiveness41.3

Government Size

Government Spending89.8

Tax Burden80.9

Fiscal Health89.5

Regulatory Efficiency

Business Freedom62.2

Labor Freedom50.7

Monetary Freedom60.1

Open Markets

Trade Freedom54.6

Investment Freedom5.0

Financial Freedom10.0

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Quick Facts
  • Population:
    • 81.4 million
  • GDP (PPP):
    • $1.6 trillion
    • 4.3% growth
    • 3.6% 5-year compound annual growth
    • $20,200 per capita
  • Unemployment:
    • 12.5%
  • Inflation (CPI):
    • 9.9%
  • FDI Inflow:
    • $5.0 billion

Iran’s economic freedom score is 51.1, making its economy the 155th freest in the 2019 Index. Its overall score has increased by 0.2 point, with higher scores for judicial effectiveness and investment freedom exceeding declines in labor freedom and business freedom. Iran is ranked 13th among 14 countries in the Middle East and North Africa region, and its overall score is below the regional and world averages.

U.S. decertification of the JCPOA nuclear deal in 2017 and reimposition of U.S. economic sanctions in 2018 caused inflation to soar and led to rapid currency depreciation. The sanctions will also hamper much-needed investment flows into the country. Powerful interest groups, mostly linked to the security and religious establishments, are opposed to the pursuit of economic liberalization and reengagement with the global economy. Given Iran’s excessive reliance on the oil sector, sustainable economic growth will remain a long-term rather than short-term objective.

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Background

Iran’s economy, one of the Middle East’s most advanced before 1979, has been plagued by mismanagement, international sanctions, and systematic graft. The repressive Islamic government is dominated by Shiite religious authorities. President Hassan Rouhani, reelected in 2017, has reportedly tried to steer a more pragmatic path, but Supreme Leader Ayatollah Ali Khamenei continues to promote radical policies. Iran has the world’s second-largest reserves of natural gas and fourth-largest reserves of crude oil. Although the 2015 nuclear agreement briefly allowed Tehran to expand its oil exports, attract greater foreign investment, and increase trade, that economic boost did not help many Iranians. Falling living standards, high unemployment, lack of freedom, and outrage over pervasive corruption have prompted widespread ongoing protests.

Rule of LawView Methodology

Property Rights 33.5 Create a Graph using this measurement

Government Integrity 35.0 Create a Graph using this measurement

Judicial Effectiveness 41.3 Create a Graph using this measurement

The government has confiscated property belonging to religious minorities. The judicial system is not independent; the supreme leader directly appoints the head of the judiciary, who in turn appoints senior judges. Corruption is pervasive, and the government applies criminal penalties for corruption subjectively, often pursuing religious minorities or political opposition. The government long ago abolished independent financial watchdogs.

Government SizeView Methodology

The top personal income tax rate is 35 percent. The top corporate tax rate is 25 percent. All property transfers are subject to a standard tax. The overall tax burden equals 8.0 percent of total domestic income. Over the past three years, government spending has amounted to 18.5 percent of the country’s output (GDP), and budget deficits have averaged 2.1 percent of GDP. Public debt is equivalent to 40.9 percent of GDP.

Regulatory EfficiencyView Methodology

A tight regulatory environment, exacerbated by excessive bureaucracy, continues to impede private investment and production. Labor regulations are restrictive, and the labor market remains stagnant. Iran’s government has maintained economically deleterious price controls and applied subsidies since the early years of the Islamic Revolution, although fiscally ruinous fuel subsidies were cut at the end of 2017.

Open MarketsView Methodology

The combined value of exports and imports is equal to 46.1 percent of GDP. The average applied tariff rate is 15.2 percent. Iran’s intrusive state continues to hold back more broadly based economic development, undermining trade and investment flows. Stringent government controls limit access to financing for businesses. State-owned commercial banks and specialized financial institutions account for a majority of banking-sector assets.

Country's Score Over Time

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Regional Ranking

rank country overall change
1United Arab Emirates77.60.0
2Israel72.80.6
3Qatar72.60.0
4Jordan66.51.6
5Bahrain66.4-1.3
6Morocco62.91.0
7Oman610.0
8Kuwait60.8-1.4
9Saudi Arabia60.71.1
10Tunisia55.4-3.5
11Egypt52.5-0.9
12Lebanon51.1-2.1
13Iran51.10.2
14Algeria46.21.5


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