Iran’s goal of achieving 8% economic growth, a key target of its seventh five-year development plan, faces steep hurdles, with economists warning that key drivers such as investment, productivity, and financing are faltering, the daily Samt reported on Monday.
“Economic growth requires prerequisites such as a favorable business environment, sound economic governance, access to technology and adequate financing. Each of these can be likened to an engine powering growth. The problem is that none of these engines are running,” wrote the paper, which covers industry, mining and trade.
According to the report, the government’s latest decree estimates Iran would need nearly 80 quadrillion rials (about $80 billion) in combined private, public and cooperative investment in the current Iranian year (started on March 21) to hit the 8% target, factoring in capital depreciation, labor contributions and productivity gains. Current financing plans leave a shortfall of about 27.9 quadrillion rials (about $28 billion).
The report listed funding sources ranging from banks and capital markets to foreign investment, the sovereign wealth fund and private savings. But it warned that reliance on public budgets and banks alone is insufficient.
Economist Vahid Shaghaghi-Shahri told the paper: “At present all our engines of economic growth have not only stalled but are working in reverse. In this context, even preventing negative growth should be considered an achievement.”
He cited housing, oil revenues and productivity as sectors in decline, while financial channels needed to supply about $200 billion annually are blocked by sanctions, low investor confidence and structural weaknesses.
Another economist, Mehdi Pazouki, argued that “without economic health no rational investor will commit to Iran.”
He said previous development programs had all set 8% growth targets that were never achieved. “When energy shortages restrict production and the business climate is hostile, such a goal is at best rhetorical,” he told the paper.
Both experts stressed the need for international engagement and domestic reforms. Pazouki said: “For meaningful growth we must first restore international relations and improve the business environment. Otherwise, capital will continue to flow abroad instead of into domestic industry.”
The report comes amid starkly different official data. Iran’s Central Bank recently announced growth of more than 3% in 2024, comparing Iran favorably to the US and eurozone, while the IMF in May projected growth of just 0.3% this year with inflation topping 43%.
Independent analysts say power shortages, a plunging rial and tighter US sanctions have pushed the economy toward stagnation.
Shaghaghi warned that unless Iran activates its “engines of growth,” negative GDP growth could emerge as early as 2026. “It is better to set realistic goals in line with our economic conditions and avoid rhetorical targets,” he said.
