Context. Iran had achieved considerable progress in raising per capita income and living standards in previous decades. But in recent years, such progress stalled as both domestic policies and the external environment deteriorated. Inflation has increased sharply and non-oil growth is well below potential. Corporate and financial-sector vulnerabilities have emerged, and unemployment rates are high. A difficult external environment and domestic vulnerabilities raise the risk of entrenching the economy in a low-growth high-inflation scenario. The authorities are well aware of the challenges and the reforms needed, but face a highly-complex institutional set-up and sociopolitical context. Advancing reforms will require broad political commitment and needs to be supported by strong coordination and cooperation among key policymakers.
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International Monetary Fund (2014) studied this question.