Raheb Homavandi / Reuters A woman speaks with a seller at the grand Bazar in central Tehran October 7, 2015.

Rebooting Iran's Economy

What Tehran Needs to Do to Fix its Finances

The deal between Iran and the P5+1 powers could not have come sooner for the Iranian economy, which has been crippled by some of the twenty-first century’s strictest economic sanctions. The United Nations Security Council’s trade embargoes against Tehran caused the state’s oil revenues to shrink daily, and made Iran’s national currency devalue by almost 80 percent. Unemployment and inflation simultaneously soared to unprecedented levels, and the Iranian economy plummeted to pre-sanctions levels. 

Iranian President Hassan Rouhani has managed to jump-start a modest economic recovery in Iran by dismantling some of his predecessor’s ill-advised populist economic policies and adopting a slew of new economic strategies. As a result, the World Bank reports, Iran’s GDP grew by 1.5 percent in 2014, following two years of economic recession. Iran’s oil revenue is essential for the nation’s recovery over the next few years, as its economy depends on this income for public investment and social services. But further economic growth in Iran will not hinge on oil revenue alone: the nation is home to a young, skilled labor force, 20 percent of which is college-educated. This stands in glaring contrast with the faster-growing economies of Brazil and India, in which laborers with a tertiary education account for less than 10 percent of the workforce. Iranian college graduates are trained in scientific fields, emerging technologies, and manufacturing—and the output they yield in a post-sanctions Iran may overshadow the economic gains expected from its soon-to-reopen oil sector.

A LOOK AT THE NUMBERS 

Although Iran has been subjected to U.S. sanctions since the 1979 Islamic Revolution, its economy has managed to grow for most of the years since. That is, until the 2006 UN Security Council sanctions came into effect. These sanctions targeted key sectors of Iran's economy (banking, gas, insurance oil, petrochemicals, and shipping, to name a few) and resulted in a 15 percent shrinkage of the Iranian economy.

Things got worse in 2012, when sanctions began to target the nation’s central bank. This

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