Economy of Iran

Economy - overview: Iran's economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and small-scale private trading and service ventures. President Khatami has continued to follow the market reform plans of former President Rafsanjani and has indicated that he will pursue diversification of Iran's oil-reliant economy although he has made little progress toward that goal. The strong oil market in 1996 helped ease financial pressures on Iran and allowed for Tehran's timely debt service payments. Iran's financial situation tightened in 1997 and deteriorated further in 1998 because of lower oil prices. The subsequent zoom in oil prices in 1999 afforded Iran fiscal breathing room but does not solve Iran's structural economic problems.

Economy - in greater depth:
Pre-revolutionary Iran's economic development was rapid. Traditionally an agricultural society, by the 1970s, Iran had achieved significant industrialization and economic modernization. However, the pace of growth had slowed dramatically by 1978, just before the Islamic revolution.

Since the revolution, increased government involvement in the economy has further stunted growth. Iran's current difficulties can be traced to a combination of factors. Economic activity, severely disrupted by the revolution, was further depressed by the war with Iraq and by the decline of oil prices beginning in late 1985. After the war with Iraq ended, the situation began to improve: Iran's GDP grew for 2 years running, partly from an oil windfall in 1990, and there was a substantial increase in imports.

A decrease in oil revenues in 1991 and growing external debt, though, dampened optimism. In March 1989, Khomeini had approved Rafsanjani's 5-year plan for economic development, which allowed Iran to seek foreign loans. But mismanagement and inefficient bureaucracy, as well as political and ideological infighting, have hampered the formulation and execution of coherent economic policies. Today, Iran’s economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and smallscale private trading and service ventures. President Khatami has continued to follow the market reform plans of former President Rafsanjani and has indicated that he will pursue diversification of Iran’s oil-reliant economy, although he has made little progress toward that goal.

Official unemployment was estimated to be 14% for 1999. Although Islam guarantees the right to private ownership, banks and some industries--including the petroleum, transportation, utilities, and mining sectors--were nationalized after the revolution, although Iran has been pursuing some privatization. (Oil price and debt problems are no longer relevant.) The import-dependent industrial sector is further plagued by low labor productivity, lack of foreign exchange, and shortages of raw materials and spare parts.

Agriculture also has suffered from shortages of capital, raw materials, and equipment, as well as from the war with Iraq; in addition, a major area of dissension within the regime has been how to proceed with land reform.

GDP: purchasing power parity - $347.6 billion (1999 est.)

GDP - real growth rate: 1% (1999 est.)

GDP - per capita: purchasing power parity - $5,300 (1999 est.)

GDP - composition by sector:
agriculture: 21%
industry: 34%
services: 45% (1997 est.)

Population below poverty line: 53% (1996 est.)

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 30% (1999 est.)

Labor force: 15.4 million
note: shortage of skilled labor

Labor force - by occupation: agriculture 33%, industry 25%, services 42% (1997 est.)

Unemployment rate: 25% (1999 est.)

Budget:
revenues: $34.6 billion
expenditures: $34.9 billion, including capital expenditures of $11.8 billion (FY96/97)

Industries: petroleum, petrochemicals, textiles, cement and other construction materials, food processing (particularly sugar refining and vegetable oil production), metal fabricating, armaments

Industrial production growth rate: 5.7% (FY95/96 est.)

Electricity - production: 95.31 billion kWh (1998)

Electricity - production by source:
fossil fuel: 92.33%
hydro: 7.67%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 88.638 billion kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: wheat, rice, other grains, sugar beets, fruits, nuts, cotton; dairy products, wool; caviar

Exports: $12.2 billion (f.o.b., 1998 est.)

Exports - commodities: petroleum 80%, carpets, fruits, nuts, hides, iron, steel

Exports - partners: Japan, Italy, Greece, France, Spain, South Korea

Imports: $13.8 billion (f.o.b., 1998 est.)

Imports - commodities: machinery, military supplies, metal works, foodstuffs, pharmaceuticals, technical services, refined oil products

Imports - partners: Germany, Italy, Japan, UAE, UK, Belgium

Debt - external: $21.9 billion (1996 est.)

Economic aid - recipient: $116.5 million (1995)

Currency: 10 Iranian rials (IR) = 1 toman; note - domestic figures are generally referred to in terms of the toman

Exchange rates: Iranian rials (IR) per US$1 - 1,754.90 (January 2000), 1,725.93 (1999), 1,751.86 (1998), 1,752.92 (1997), 1,750.76 (1996), 1,747.93 (1995); black market rate: 7,000 rials per US$1 (December 1998); note - as of May 1995, the "official rate" of 1,750 rials per US$1 is used for imports of essential goods and services and for oil exports, whereas the "official export rate" of 3,000 rials per US$1 is used for non-oil exports and imports not covered by the official rate

Fiscal year: 21 March - 20 March