Iran’s construction industry is expected to grow by 2.5% in real terms in 2022, following annual growth of 1.8% in 2021. It is then expected to register an annual average growth of 3.6% between 2023-26, supported by government investments on the energy, oil and gas, petrochemicals, infrastructure and industrial sectors.
Over the year, the industry’s output will be supported by government expenditure under the 2022 Budget which was announced in December 2021. The government released a budget of IRR36.3 quadrillion ($864.3 billion), projecting IRR9.3 quadrillion ($221.5 billion) in revenue and IRR13.9 quadrillion ($332 billion) in spending.
Of the total budget, the government allocated IRR20.1 trillion ($478.6 million) to the Ministry of Cultural Heritage, Tourism and Handicrafts, IRR158 trillion ($3.8 billion) to the Ministry of Education and IRR349.5 trillion ($8.3 billion) to defense infrastructure and strategic research, among others.
Over the remainder of the forecast period, the industry’s output will be supported by construction of major projects, including the 300,000-barrel Shahid Ghasem Soleimani oil refinery project with an investment of IRR483 trillion ($11.5 billion), the Khuzestan refinery with an investment of IRR189 trillion ($4.5 billion) and the development and stabilization of the Abadan refinery, with an investment of IRR84 trillion ($2 billion).
Additionally, an investment of IRR45 trillion ($1.1 billion) over the next four years, to develop 10 key motorways, will improve the transportation network across the country. Moreover, the country’s talks with the Taliban to resume work on the Khaf-Herat link project, connecting northeastern Iran with northwestern Afghanistan, could help in enhancing the railway network and improving trade relations between the countries.
However, there are key political and economic risks that could impact on investor confidence. On May 5 2022, the government increased prices for basic food items, which has compounded financial challenges for households and led to the protests against President Ebrahim Raisi and Supreme Leader Ayatollah Khamenei across many areas of the country.