Iran Faces Investment Slump as Foreign and Domestic Investors Pull Back

TEHRAN (Iran News) Speaking to ILNA, Farshid Shokrokhodaei said capital that would otherwise flow into productive sectors is increasingly moving toward gold and foreign currency markets.

According to official reports, gross fixed capital formation growth fell to negative 4.8 percent in the summer, marking its lowest level in four and a half years and a decline of 2.9 percentage points compared to the previous quarter. Economists caution that in a capital-intensive economy such as Iran’s, declining investment reduces productive capacity, erodes existing capital stock, lowers productivity, and weakens long-term growth prospects.

Asked about the impact of the current state of “suspension” between war and peace with the United States on businesses, Shokrokhodaei said investors are postponing decisions and halting development projects.

“In such conditions, investors focus on preserving the status quo,” he said. “They are no longer thinking about expansion or maintaining employment; their priority is simply to keep their businesses afloat.”

He warned that prolonged uncertainty inevitably leads to the erosion of businesses and economic capacity.

Shokrokhodaei noted that Iran’s capital formation rate has been negative for eight consecutive years, meaning new investments do not even compensate for capital depreciation.

“To achieve a positive capital formation rate, investment must exceed the amount of capital that is being worn out,” he said. “Currently, that is not happening.”

He attributed the situation to both the inability to attract foreign investment and the reluctance of domestic investors to commit capital amid ongoing uncertainty.

“When uncertainty persists, investment motivation declines. Investors wait for clarity, and the most important resource that is wasted is time,” he added.

Shokrokhodaei argued that a decade that could have been a period of economic flourishing has instead been lost due to indecision and delays within decision-making institutions.

“Opportunities have been destroyed. We see that in the government and parliament, many decisions are postponed,” he said.

He emphasized that capital is being diverted into assets such as gold and foreign currency rather than productive investment. “What is lost and cannot be replaced is time. We have lost a ten-year window for investment in this country,” he said.

“Not only are foreigners no longer investing in Iran, but Iranians themselves are also refraining from investing,” he added.

Shokrokhodaei concluded by stressing the need to open the country’s economy and prioritize economic policy. “The economy must become the central axis of the country,” he said. “At present, ideology and politics are the main driving wheels, and the economy is treated as secondary. When the economy becomes the main engine, the system will begin to function properly.”