Iran Economy

Iran Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

Iran’s economy began to slowly recover from 2021. GDP is taking on an increasing trend, it grew by 2.5% in 2021, predictions for 2022 even count on a very optimistic figure exceeding 10% growth. In addition, according to estimates, this trend should continue in the coming years, even if the existing anti-Iranian sanctions are maintained. However, the country is still struggling with huge inflation. According to official statistics, this is in the range of 40-55%. However, some analysts claim that real inflation has reached up to 80% in 2021, and in the case of some products, prices have even risen by hundreds of percent. Official unemployment remains relatively low, but real numbers may be higher, especially for young Iranians. In addition, it is common to work 2-3 jobs, because wages are low and in many cases not enough to cover basic living expenses. Therefore, the growth of the Iranian economy in no way means that Iranians are doing better than in previous years. On the contrary, Iranians are getting poorer and their purchasing power is shrinking. In 2021, many employees in both the private and state sectors did not get paid for several months at a time, most benefits and rewards were canceled. In addition to more expensive food, Iranians also paid extra for rents, which rose by an average of 47% in 2021 (50-55% in the capital city of Tehran, in the case of commercial premises, all of them saw an increase of up to 100%), and further for health care, clothing and footwear and gave According to estimates, it needs min. 40 million Iranians (ie about half of the population), necessarily at least basic state support. The development of the economy is also hindered by a lack of investment. All infrastructure is significantly worn. The situation is worst in the construction industry, transport, banking, insurance, real estate, culture and agriculture. The government introduced new incentives for investors in March 2022, but it is not yet possible to determine whether they will bring the desired results. Starting a business is almost impossible under the current conditions, according to the World Bank’s “Ease of Doing Business” index, Iran is in 127th place out of a total of 190 countries, only Lebanon, Iraq, Syria, Libya and Yemen fare worse in the Middle East. Check ebizdir for economical facts of Iran.

Iran is a major exporter of energy raw materials. It has the 2nd largest natural gas reserves in the world and the 4th largest oil reserves. However, as a result of US sanctions, it is unable to export as much oil and gas as it could, has to sell below cost, and is also unable to repair and build the necessary infrastructure. Revenues from the sale of energy raw materials still make up a third of the state budget. Under the influence of sanctions, Iran is focusing on strengthening self-sufficiency, diversifying the economy and, after the inauguration of the Raisi government in the summer of 2021, also on strengthening economic ties with neighboring states. The export of petrochemical products with a higher added value (thermoplastics, methanol, petroleum bitumen), the export of food products (different standards sometimes cause problems here, e.g. fruits and vegetables contain a high amount of pesticides) is particularly successful.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) -6.8 -4.8 2.5 13.8 6.1
GDP/population (USD/PPP) 12,937.50 13,333.10 13,860.00 14,440.00 14,600.0
Inflation (%) 40 30.5 43.4 36 32
Unemployment (%) 11.4 11.2 9.9 9.2 9
Export of goods (billion USD) 59.4 34.9 74.8 120.8 127.8
Import of goods (billion USD) 49.2 37.7 51.8 59.5 66.7
Trade Balance (Billion USD) 7.2 3.2 17.1 12.4 4.7
Industrial production (% change) -33.4 -11.1 21.5 35 14
Population (millions) 82.9 84 85 86 87
Competitiveness ON ON ON ON ON
OECD export risk 07.VII 07.VII 07.VII ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -10.8
Public debt (% of GDP) 27.8
Current account balance (billion USD) 15
Taxes 2022

Iran’s total public debt reached an estimated 27.8% of GDP by the end of 2021. In fiscal year 2022/2023, Iran is projected to take on another 2.7% of GDP. Access to the provision of foreign loans and credit lines is very difficult for Iran with regard to sanctions and non-fulfillment of FATF conditions (Iran has been on the FATF blacklist since 2021).

Foreign exchange reserves have been transferred to the National Development Fund since 1390 (2011/2012) and are also partially used to finance imports of selected categories of goods subject to a subsidized exchange rate. In the last decade, it accounted for a total of about 20% of Iran’s oil export earnings. At the end of 2019, the amount of foreign exchange reserves was estimated at approximately USD 86 billion. In 2020, Iran was forced to use up a large part of these reserves as a result of sanctions and the Covid-19 pandemic.

The State Budget for Fiscal Year 1401 (3/2022 – 3/2023) is, like in previous years, 40% based on oil export revenues (calculated at a price of USD 70 per barrel, while currently exporting around 1 million barrels per day; in if the JCPOA is renewed, Iran could export twice as much at a price of $100 per barrel). The war in Ukraine can largely help to fulfill this assumption. If the JCPOA is renewed, the total revenue from oil sales could be even higher. The budget also provides for large-scale privatizations, especially in the field of communications and IT technologies, agriculture, energy and transport. At the same time, it increases some taxes and bank levies on income from the execution of payment transactions, as well as the price of water, the shortage of which is increasingly pressing in Iran (during the summer months, it is quite common for the water not to flow for several hours a day).

Banking system

The international role of the dollar (that is, the currency on which the capital, reserves and international payment systems of almost all banks are based) makes the vast majority of banks afraid to violate the US sanctions, because then they could lose access to the dollar and, in essence, cease to operate. For that reason, the banking connection with Iran is very limited. E.g. there is no bank in the Czech Republic that would allow a bank connection with Iran. Czech payment cards cannot be used in Iran either. A company that wants to do business with Iran therefore has to do the business either in cash or find a bank or an intermediary who will be willing to carry out the transaction. It very often happens, however, that the payment from Iran ends up not happening even in this way at all, and several years of debt collection follow. In practice, these conditions force Iranian businessmen to establish companies abroad through which they can conduct business,

Iran’s banking sector consists of more than three dozen banks and credit institutions:

  • Central Bank (Central Bank of Iran, also known as Bank Markazi);
  • state-owned commercial banks: Bank Melli Iran, Bank Sepah, Post Bank of Iran;
  • specialized state-owned commercial banks: Keshavarzi Bank (agriculture, water management, manufacturing), Bank Maskan (housing), Bank of Industry and mine (Persian San’at va Ma’adan Bánk, industrial production and metallurgy), Export Development Bank of Iran (Persian Tóse’e Sáderat Bánk, services and foreign trade), Cooperative Development Bank (Persian Tóse’e Ta’avon Bánk, research and development);
  • private banks: EN Bank (Persian Eqtesád Novín Bánk), Parsian Bank, Karafarin Bank, Saman Bank, Bank Pasargad, Sarmayeh Bank, Sina Bank, Ayandeh Bank, City Bank (Persian Šahr Bánk), Dey Bank, Tejarat Bank, Refah Bank, Bank Saderat Iran (export bank), Bank Mellat, Hekmat Iranian Bank, Tourism Bank (Persian Gardeshgari Bánk), Iran Zamin Bank, Middle East Bank (Persian Chávar-e Mijáne Bánk), Ghavanim Bank;
  • private credit institutions and credit banks (so-called Qarzolhasaneh): a total of 5 institutions incl. Mehr Iran Bank (note: this bank is on the UN and EU sanctions list!) and Resalat Bank.

The most important banks are: Bank Melli Iran, Bank Sepah, Bank Pasargad, Tejarat Bank and Bank Mellat.

Insurance companies: In general, all Iranian state and private commercial entities are required to insure shipments when exporting from Iran, choosing an insurance company is voluntary. Insurance is not necessary for imports to Iran, it depends on the conditions determined by the contract. It is recommended to insure shipments from/to Iran by including an insurance clause in export and import contracts. The insurance system in Iran is for the most part owned by the state, and is gradually being deregulated and privatized. The Export Guarantee Fund of Iran is able to insure risks during the export of non-oil items. Otherwise, the main national insurance company is the state insurance company Bimeh Markazi Iran.

Tax system

Iran’s tax system consists of direct and indirect taxes. The main direct taxes are income tax and property tax. Income tax ranges from 10 to 35%, depending on the amount of income, with legal entities paying 20% ​​after deduction of tax credits. Property tax is 15-25%. Indirect taxes include, in particular, customs duties and VAT. Duty varies depending on the industry. The basic VAT rate is 9% (consumer and industrial goods, services, imported and exported goods), it consists of a basic tax of 6% and local fees of 3%. Income tax applies to income arising from activities carried out both in Iran and outside Iran. Foreign taxpayers pay income tax for income arising from activities carried out only in Iran. Contractors also have to reckon with the high costs of fees and health and social insurance.

Iranian laws do not allow payment of taxes and fees by another entity (e.g. customer). Such an obligation is therefore invalid from the point of view of Iranian legislation even if it is included in the contract. However, it is possible to legally set the price of the project, the so-called tax free price, and include in the contract a provision that any corporate and personnel taxes and fees arising from the implementation of the project will be refunded to the supplier by the customer.

In addition to standard taxes, there is also a system of religious taxes in Iran, which are enshrined in Sharia law and which Muslims pay directly to mosques.

Iran Economy