Embed This Data
- GDP (PPP):
- $1.5 trillion
- 0.0% growth
- 0.1% 5-year compound annual growth
- $18,078 per capita
- Inflation (CPI):
- FDI Inflow:
Iran’s economic freedom score is 50.9, making its economy the 156th freest in the 2018 Index. Its overall score has increased by 0.4 point, with modest improvements in monetary freedom, labor freedom, and government integrity offsetting lower scores for the fiscal health, government spending, and judicial effectiveness indicators. 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.
Because 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, and given Iran’s excessive reliance on the oil sector, sustainable economic growth in Iran will remain a long-term rather than short-term objective. U.S. decertification of the nuclear deal in October 2017 and widening economic sanctions will hamper much-needed investment flows into the country.
Iran’s economy, one of the Middle East’s most advanced before 1979, has been plagued by mismanagement, international sanctions, graft, and regional tensions. The repressive Islamic government is dominated by Shiite religious authorities. A weak president is elected to four-year terms in a process controlled by hardline clerics. President Hassan Rouhani, reelected in 2017, has tried to steer a pragmatic and less confrontational 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. The relaxation of sanctions and reintegration into the international economy resulting from the 2015 nuclear agreement have allowed Tehran to expand its oil exports, attract greater foreign investment, and increase trade.
Although Iranians have the legal right to own property and establish private businesses, the government plays the dominant role in the economy and can confiscate property. The judicial system is not independent and is used to silence critics and opposition members. Corruption remains endemic at all levels of the bureaucracy. The hard-line clerical establishment and its tax-exempt foundations are never scrutinized.
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 7.1 percent of total domestic income. Over the past three years, government spending has amounted to 17.2 percent of total output (GDP), and budget deficits have averaged 1.9 percent of GDP. Public debt is equivalent to 35.0 percent of GDP.
The Iranian government directly owns and operates hundreds of state-owned enterprises and indirectly controls many companies, limiting the ability of private-sector businesses to compete. Labor regulations are restrictive, and the labor market remains stagnant. The government has maintained economically deleterious price controls and subsidies since the Islamic Revolution began and is prevented by law from balancing the budget by cutting them.
Trade is moderately important to Iran’s economy; the combined value of exports and imports equals 39 percent of GDP. The average applied tariff rate is 15.2 percent. Nontariff barriers impede trade. Government policies like production caps limit foreign investment. Strict government controls limit businesses’ access to financing. State-owned commercial banks account for a majority of total banking assets, and the government directs credit allocation.