The International Monetary Fund (IMF) predicts a slowdown in Iran’s economic growth for 2024 and 2025. Their quarterly report on the global economy states that Iran’s oil-fueled growth of 4.7% in 2023 (1402 in the Iranian calendar) is likely to drop to 3.3% this year and 3.1% next year.
The report highlights a lack of momentum in both the oil and non-oil sectors compared to the previous year. While Iran’s oil exports surged 44% in 2023, reaching 1.3 million barrels per day, this growth appears to be plateauing. Daily oil production reached 2.86 million barrels in 2023, but the first quarter of 2024 saw only a negligible increase of 0.5% compared to the previous quarter.
High Inflation Remains a Challenge
The IMF also forecasts inflation to remain high at 37.5% in 2024. Iran has grappled with inflation exceeding 30% since 2018, and this trend is expected to continue.
Geopolitical Tensions Add Uncertainty
In a March 2023 report, the IMF warned of potential economic consequences for Iran in case of escalating regional conflicts. A limited involvement in the Israel-Hamas conflict could have resulted in negative growth of 5%, while a wider war involving Hezbollah in Lebanon could have shrunk Iran’s economy by 20%.
Recent attacks on Israel and the potential for retaliation raise concerns about a similar economic impact in Iran. The Iranian currency market experienced significant fluctuations after the attacks, with the dollar briefly reaching 70,000 tomans.
Government Budget Faces Challenges
The head of Iran’s parliamentary budget commission predicts a significant deficit of 300 trillion tomans in the 2024 budget. This deficit will likely be financed through bank loans or bond issuance, both carrying their own risks. Heavy reliance on bank borrowing in previous years has already led to a substantial government debt.
Central bank data reveals a more than 55% increase in government and state-owned company debt to the banking system between February 2022 and 2023. This figure has doubled since the start of Ebrahim Raisi’s administration.
While regime officials claim a balanced budget due to increased tax revenue and oil income, independent forecasts suggest a deficit of 550 trillion tomans in 2023, likely covered by borrowing.
Uncertainties Remain
The full extent of government borrowing remains unclear. Iran faces a confluence of economic challenges, including declining growth, persistent high inflation, and potential consequences from regional conflicts. These factors raise concerns about the long-term health of the Iranian economy.
Iran’s Gasoline Imports Add to Trade Concerns
Adding to concerns about Iran’s trade balance, the government was forced to import $2 billion worth of gasoline in 2023. This information comes despite attempts to inflate export figures by including items like oil, electricity, and technical services. However, Iran’s customs data excludes these imports from their total import statistics.
Previously, Iranian authorities acknowledged starting gasoline imports in spring 2023. However, this is the first time a specific import value has been revealed. The need for imports highlights the gasoline shortages Iran has faced since summer 2022 (1401 in the Iranian calendar).
