Iran's economy is expected to grow by 3.5% in 2024, according to the International Monetary Fund (IMF), driven by a rebound in oil production and exports, as well as increased government spending. However, the economy is still facing a number of challenges, including high inflation, unemployment, and sanctions.

Oil production and exports: Oil is Iran's main source of revenue, and a rebound in production and exports is critical for the economy's recovery. Oil production stood at 3mn barrels per day on average in 2023. It is expected to remain at the same level as long as sanctions remain in place. Exports were below 2mn bpd in 2023 and they are expected to remain at the same level in the new year, though much depends on the state of US sanctions against Iran.

The United States eased some of its sanctions on Iran's oil sector earlier in 2023. However, souring Tehran-Washington ties following the Israel-Hamas war, which broke out on October 7, could affect the degree of enforcement of the sanctions in the year ahead.

The growth Iran’s economy registered in 2023 was mainly thanks to the rise in crude output. Other sectors of the economy remained largely in recession.

Government spending: The Iranian government is anticipated to increase spending in 2024, as it seeks to boost economic growth. The government plans to increase spending on infrastructure, healthcare, and imports of basic food items like wheat, barley, rice, and corn to supply growing domestic needs.

Inflation: Inflation is a major challenge for the Iranian economy. The inflation rate, mired at around 45% in 2023, is expected to remain high in 2024.

Unemployment: Unemployment is another major challenge for the Iranian economy. The unemployment rate is expected to remain high in 2024, at around 12%. This is due to factors including the lack of economic growth and the large youth population, in addition to the sanctions.

Sanctions: Sanctions are a major obstacle to the country's economic development. The sanctions have made it difficult for Iran to trade with other countries, access international financial markets, and invest in its economy.

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