ECONOMY
Pre-revolutionary Iran's economic development was rapid. Traditionally an agricultural society, by the 1970s Iran had achieved significant industrialization and economic modernization, helped in large part by the growing worldwide demand for oil. However, the pace of growth had slowed dramatically by 1978, just before the Islamic revolution. Since the fall of the shah, economic recovery has proven elusive thanks to a combination of factors, including state interference in the economy and fluctuations in the global energy market. Economic activity was severely disrupted additionally by years of upheaval and uncertainty surrounding the revolution and the introduction of statist economic policies. These conditions were worsened by the war with Iraq and the decline in world oil prices beginning in late 1985. After the war with Iraq ended, the situation began to improve: Iran's GDP grew for two years running, partly from an oil windfall in 1990, and there was a substantial increase in imports. Iran's social policies during the Iran-Iraq war resulted in a baby boom. Nonetheless, Iran continues to suffer from "brain drain" as its educated youth leave the country to pursue better economic opportunities.
A decrease in oil revenues in 1991 and growing external debt dampened optimism for recovery. In March 1989, the government instituted a new 5-year plan for economic development, which loosened state control and allowed Iran to seek greater latitude in accessing foreign capital. Mismanagement and inefficient bureaucracy, as well as political and ideological infighting, hampered the formulation and execution of a consolidated economic policy, and Iran fell short of the plan's goals while economic inequality was aggravated. Former President Khatami followed the market reform plans of his predecessor, President Rafsanjani, and indicated that he would pursue diversification of Iran's oil-reliant economy, although he made little progress toward that goal. High inflation and expansive public transfer programs, as well as powerful economic-political vested interests, created obstacles for rapid reform.
Unemployment, a major problem even before the revolution, has many causes,
including population growth and restrictive labor policies. Farmers and peasants
enjoyed a psychological boost from the attention given them by the Islamic
regime but hardly appear to be better off in economic terms. The government has
made progress on rural development, including electrification and road building,
but Iran still faces inefficiencies related to agricultural land usage which are
politically difficult to reconcile. Agriculture also has suffered from shortages
of capital, raw materials, and equipment, problems dating back to the 1980-1988
war with Iraq. (See Foreign Relations below.)
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 under Marxist-influenced economic policies. Starting under President Rafsanjani, Iran has pursued some privatization through its nascent equities markets. However, the industrial sector remains plagued by low labor productivity and shortages of raw materials and spare parts, and is uncompetitive against foreign imports.
Today, Iran's economy is marked by a bloated and inefficient state sector, a reliance on the oil sector (which provides over 85% of government revenues), and statist policies that create major distortions throughout. Most economic activity is controlled by the state. Although the Supreme Leader issued a decree in July 2006 to privatize 80% of the shares of most government-owned companies, private sector activity is typically limited to small-scale workshops, farming, and services. President Mahmud Ahmadi-Nejad has failed to make any notable progress in fulfilling the goals of the nation's latest five-year plan. A combination of price controls and subsidies (on food and energy in particular) continue to weigh down the economy, and administrative controls, widespread corruption, and other rigidities undermine the potential for private-sector-led growth. As a result of these inefficiencies, significant informal market activity flourishes and shortages are common. High oil prices in recent years have doubled export earnings since 2004 and have enabled Iran to amass nearly $65 billion in foreign exchange reserves. Yet this increased revenue has not eased economic hardships, which include high unemployment (11% according to government estimates) and double-digit inflation, and the economy has only seen moderate growth. Iran has an educated population, and economic inefficiency and insufficient investment (both foreign and domestic) have prompted an increasing number of Iranians to seek employment overseas, resulting in significant "brain drain."
GDP (purchasing power parity, 2007 est.): $852.6 billion.
GDP (official exchange rate, 2007 est.): $222.4 billion.
GDP real growth rate (2007 est.): 6.2%.
GDP composition by sector (2007 est.): Agriculture 10.4%, industry 33%, services 48.8%.
Per capita income (PPP, 2007 est.): $12,300.
Work force (2007 est.): 23.5 million.
Work force - by occupation (June 2007): Agriculture 25%, industry 31%, services 45%.
Unemployment rate (according to the Iranian Government): 12.1%.
Natural resources: Petroleum, natural gas, coal, chromium, copper, iron ore, lead manganese, zinc, sulfur.
Agriculture: Principal products--wheat, rice, other grains, sugar beets, fruits, nuts, cotton, dairy products, wool, caviar. Note: Iran is not self-sufficient in terms of food.
Industry: Types--petroleum, petrochemicals, textiles, cement and building materials, food processing (particularly sugar refining and vegetable oil production), metal fabricating (particularly steel and copper), armaments.
Trade (2007 est.): Exports--$76.5 billion: petroleum 80%, chemical and petrochemical products, carpets, fruits, nuts. Major export partners (2007)--U.A.E. (17.1%), Germany (13.6%), Italy (6.7%), Turkey (5.3%), India (4.8%), Azerbaijan (4%), Turkmenistan (2.4%), China (3%), Singapore (2.5%). Imports--$61.3 billion: industrial raw materials and intermediate goods, capital goods, foodstuffs and other consumer goods, technical services, military supplies. Major import partners--Germany (12%), China (10.5%), U.A.E. (9.4%), France (5.6%), Italy (5.4%), South Korea (5.4%), Russia (4.5%).
