Iran’s latest national accounts data show an economy that continues to hover around zero growth, with both demand-side and supply-side weaknesses preventing any meaningful rebound.
According to figures released by the Statistical Center of Iran (SCI), gross domestic product at constant 1400 (2021–22) prices reached 5,066 trillion tomans in the first half of 1404 (March–September 2025), slightly above the 5,061 trillion tomans recorded a year earlier, resulting in a marginal 0.1% expansion. Excluding oil, GDP slipped by 0.5%, highlighting the extent to which recent growth depends on hydrocarbon output.
The quarterly breakdown points to a fragile and uneven pattern. After economic output contracted by 0.2% in spring 1404 (March–June 2025), GDP grew 0.3% in summer 1404 (June–September 2025)—a modest improvement that nonetheless falls far short of the targets outlined in the Seventh Development Plan.
Sectoral performance reinforces this picture of weakness. Agriculture recorded a 3.2% drop in the summer quarter, while industry and mining expanded by 0.9%, and services grew by 0.5%. Over the six-month period, agriculture posted a 3% decline, services rose 0.5%, and industry and mining increased 0.3%. Excluding oil, however, industry and mining registered a 0.9% contraction.
From a demand perspective, the data are similarly subdued. Private final consumption expenditure continued to weaken, falling 1.2% in the first half of the year after a 1.1% decrease in spring. Persistent economic uncertainty, a rise in precautionary savings, and the erosion of household purchasing power have kept consumption under pressure.
Capital Crunch
More troubling is the deeper decline in gross fixed capital formation, a key driver of future economic growth. Capital formation fell 1.9% in spring and 3.4% across the first six months of the year. Investment in machinery was down 5.2%, while construction investment slipped 0.8%, signaling restrictive financial conditions, postponed investment plans, and long-standing structural constraints.
The supply-side story has been shaped by both domestic and geopolitical shocks. SCI data show that Iran’s quarterly GDP has been losing momentum since autumn 1402 (September–December 2023), when growth stood at 5.5%.
The subsequent slowdown—culminating in a 0.2% contraction by spring 1404—has been compounded by political risks affecting oil sales and heightened regional tensions.
The economy entered summer under a “no-war, no-peace” environment following escalations involving Israel and the United States. According to local analysts, this climate has discouraged investment, weakened supply chains, and eroded business confidence.
In summer 1404, the strongest contribution came from oil and gas extraction, which expanded 2.8%. In contrast, water and electricity utilities experienced a 5.4% decline, and construction activity decreased 1.7%.
The service sector—traditionally the country’s largest employer—remained soft. Financial intermediation grew 9.4%, driven by inflation-hedging behavior and rising asset prices, while trade, hotels, and restaurants recorded a 2.8% fall amid weaker travel demand and higher operational costs.
Subdued Outlook
With inflation close to 40%, continued pressure on household spending, and shrinking investment, the outlook for the remainder of the year remains subdued.
Analysts expect overall economic growth to remain within the 1–2% range—far below the 8% annual target set in the Seventh Development Plan.
The reliance on oil to generate even modest growth underscores the vulnerability of the current economic trajectory. Without stronger investment in productive sectors, clearer policy direction, and greater macroeconomic stability, a return to broad-based and higher growth appears unlikely in the near term.
