Iran Economic Monitor - Adapting to the New Normal : A Protracted Pandemic and Ongoing Sanctions

Iran's economy is gradually recovering following a lost decade (2011-2020) of negligible economic growth. Less stringent COVID-19 restrictions, adaptation to the new normal- reflected in a recovery in consumption, and more favorable oil sector conditions have driven a four-quarter rebound after June 2020, albeit from a low base.

Iran's economic outlook is affected by the COVID-19 pandemic and the demand prospects from key export partners. Major risks to Iran's economic outlook relate to the course of the pandemic and the prospects of geopolitical developments. The economy also remains vulnerable, albeit less than in the past, to future downturns in global oil prices. The mounting climate change challenges resulting in more severe water and energy shortages together with high inflation could further increase pressures on the most vulnerable and add to social grievances. Upside risks relate to the possibility of sanctions relief which could boost economic activity, as the economy has chronically operated below potential capacity.