Last year, Iran experienced notable economic growth sitting at a robust 5%, driven by increased oil exports and governmental spending initiatives. However, according to a forecast from the International Monetary Fund (IMF), this promising trend may be short-lived. The IMF is projecting a significant downturn in Iran’s economic growth for the coming years. The growth rate is expected to plummet to 3.7% this year, decline further to 3.1% in 2025, and eventually drop to just 2% by 2029. This bleak scenario casts serious doubt on Iran’s ambitious target outlined in its Seventh Five-Year Development Plan (2024-2028), which aims for an 8% growth rate.
President Massoud Pezeshkian recently emphasized the critical need for substantial investment to reach the 8% growth target, estimating that $200-$250 billion would be necessary. However, with only $100 billion available domestically, the president highlighted the need for an additional $100 billion in foreign investment. Such an influx of foreign capital seems like a challenging prospect, especially given the current economic climate. Supporting Pezeshkian’s argument, statistics from the United Nations reveal a substantial drop in annual foreign direct investment, which has dwindled to merely $1.5 billion. In stark contrast, Iran’s Central Bank reports record capital flight exceeding $20 billion in just the first nine months of last year alone. To further underline the gravity of the issue, the IMF projects that the investment-to-GDP ratio will drop from 40% in 2023 to below 37% by 2029.
Rising Government Debt and Inflation
Last year, Iran showed notable economic growth at 5%, driven by increased oil exports and government spending. However, the International Monetary Fund (IMF) foresees a significant downturn in Iran’s economic trajectory. The IMF projects that growth will fall to 3.7% this year, drop further to 3.1% by 2025, and shrink to just 2% by 2029. This grim outlook challenges the ambitious goals set in Iran’s Seventh Five-Year Development Plan (2024-2028), which aims for an 8% growth rate.
President Massoud Pezeshkian stressed the urgency of substantial investment to meet the 8% target, estimating the need for $200-$250 billion. With only $100 billion available domestically, an extra $100 billion in foreign investment is necessary—a difficult feat in the current economic climate. Supporting Pezeshkian’s concerns, United Nations statistics show a sharp decline in annual foreign direct investment to just $1.5 billion. In contrast, Iran’s Central Bank reports a record capital flight exceeding $20 billion in the first nine months of last year alone. Further exacerbating the issue, the IMF predicts that the investment-to-GDP ratio will dip from 40% in 2023 to below 37% by 2029.