This poverty diagnostic reviews welfare outcomes in the Islamic Republic of Iran between 2011 and 2020, with a focus on poverty and shared prosperity. Iran is the only country in the Middle East and North Africa region (MENA) that collects high quality household budget survey data on an annual basis and makes them publicly available. Drawing from this data, this diagnostic will look at the trends, determinants, and drivers of poverty in Iran at the national, subnational, and household levels. Two further deep dives will be published in early 2024, one on the differential impact of the reimposition of sanctions and of COVID-19 on household welfare: and the second on the welfare implications of drought and water scarcity. The analysis in this report outlines a dramatic increase in poverty in Iran, against the backdrop of a lost decade of economic growth. Subject to on-again, off-again sanctions, swings in international oil prices, and the COVID-19 pandemic, the country saw its per-capita GDP contract by 0.6 percentage points each year, on average, over the past decade. Better management of volatile oil revenues and continued efforts to diversify may help mitigate the economic impact of these fluctuations in the future. Addressing the underlying drivers of inflation will also ensure that earnings are not eroded by increasing prices. The country has seen almost 10 million people slide into poverty, exacerbating social inequities. Forty percent of Iranians are vulnerable to falling into poverty. The lack of growth offers a partial explanation for this dismal welfare trend, but it is not the whole story. Indeed, during Iran’s short period of economic expansion, poverty rates barely budged. The benefits of growth accrued to households in the top consumption quintiles while households in the bottom quintiles were left behind. There is also evidence of persistent structural inequities between rural and urban residents, men, and women, and those with and without a secondary education. Looking forward, there is scope to address structural inequities in the country.
