Iran is a country in the Middle East that is strategically located on the Strait of Hormuz and the Persian Gulf that are important pathways for shipment of crude oil. The country is a mixed and transition economy dominated by gas and oil production industries and has 10% of the world’s oil reserves. Iran has a high development potential and is a member of the Next Eleven countries (N-11). Iran has a centrally controlled economy with a large public sector. The government controls prices, and there are subsidies on some products leading to a strain on the economy. Iran initially existed as a financially isolated country but was forced to sign agreements with other nations after the sanctions relating to nuclear programs.
Overview Of The Economy Of Iran
Iran’s fiscal year runs from March 21st to March 20th the following year. Iran has a nominal GDP of $416.5 billion ranking 29th and $1.357 billion Purchasing Power Parity which ranks 18th. The contribution per sector to the GDP is estimated as services at 50.3%, industry at 40.7% and agriculture at 9.1%. The GDP per capita is $476 ranking 96th worldwide and 71st regarding PPP at $17400. The GDP grew by 4.3% in 2014, 4.4% in 2016 and is projected to grow by 4.9% in 2017. The GDP by component in Iran is broken down as follows: household consumption- 45.4%, government consumption 14.1%, gross fixed investment 31.1%, investment in inventories 1.2%, export of goods and services 20.8% and import of goods and services -12.7%. Iran has an inflation rate of 7.5% with 18.7% of the population living below the poverty line. The unemployment rate is estimated at 12.8%. Iran earns revenue of $56.11 billion and spends $70.12 billion on exchange rates. The budget deficit takes up 3.5% of the GDP.
Main Industries Of Iran
The economy of Iran is dominated by oil and gas production which makes up the largest revenue source for the government. Other major industries include petrochemicals, fertilizers, caustic soda, car manufacture, pharmaceuticals, telecom, energy, construction materials, textiles, cement, metal fabrication and food processing.
Main Exports Of Iran
Exports earned Iran an estimated $78.99 billion in 2015. The main exports were petroleum at 80% of the total exports. Other exports include petrochemicals, chemicals, automobiles, fruits, nuts, and carpets.
Export Partners Of Iran
Iran’s major export partners include China importing 22.2% of all Iranian exports, India 9.9%, Turkey 8.4% and Japan 4.5%
Main Imports Of Iran
Iran spent an estimated $70.63 billion on import in 2015. The main import goods include industrial raw materials and intermediate goods, foodstuffs and consumer goods, capital goods, and technical services.
Main Import Partners Of Iran
Iran’s import partners include the United Arab Emirates 39.6%, China 22.4%, South Korea 4.7% and Turkey 4.6%.
Challenges To The Economy Of Iran
The Iranian economy is plagued with numerous challenges from price control, corruption, and restrictive policies which undermine the growth and expansion of the private sector. Iran suffers high rates of unemployment and inflation leading to migration of citizens to other countries to seek employment leading to a brain drain in the country.
After the Iranian economy declined following the trade restrictions in 2011/12, the Iranian government signed agreements with other countries including Germany and US to rebuild the economy and establish new economic opportunities. Iran is still working on policies to improve trade and employment opportunities for the people as well as to encourage foreign investments in the country.