The International Monetary Fund (IMF) has slightly upgraded Iran’s economic growth forecast for the calendar year 2025 (Iranian fiscal year begins March 20) to 0.6%, a modest increase from its previous 0.3% projection. The upward revision signals a degree of resilience despite external pressures, but the outlook remains grim due to severe macroeconomic instability and mounting internal issues. The slow growth is being constrained by intensified sanctions, entrenched water and energy shortages (with precipitation down 41% since 2024), and heightened uncertainty following recent regional conflict escalation.
The modest growth is largely being driven by the services sector (specifically wholesale and retail trade), which is slightly offsetting a sharp slowdown in the oil sector and a contraction in non-oil industries. However, the costs of this instability are soaring for consumers and the labor market. The IMF projects average consumer price inflation to surge to 42.4% in 2025 (up from 32.5% in 2024) and is expected to remain elevated at 41.6% in 2026. This inflationary pressure is fueled by a widening budget deficit, persistent foreign exchange pressures, and a lack of investor confidence.Compounding the inflation crisis, the IMF forecasts that the unemployment rate will increase to 9.2% in 2025 (up from 7.6% in 2024). The economic slowdown is adding to existing labor market challenges, where only about three in ten working-age Iranians are employed, a rate that is even lower for women. The combination of rampant inflation and rising joblessness threatens to erode households’ purchasing power and increase the risk of social tensions, underscoring the severity of the economic and structural challenges facing the nation.
