Pakistan vs Iran: GDP, Growth & Trajectory

Turning Point

In 2024, Pakistan's GDP stood at $371.5B versus Iran's $446.0B — a ratio of 0.83x. The nominal gap of $74.5 billion reveals that despite decades of international isolation and a steep contraction in 2020, Iran's hydrocarbon-anchored economy still out-produces Pakistan's much more populous, agriculturally heavy neighbour. That headline ratio, however, masks a far more consequential asymmetry: the same year's per-capita GDP ratio stood at just 0.31, meaning the average Iranian generated more than three times the output of the average Pakistani citizen.

The turning-point narrative is less about a single year and more about the structural forces that have kept these two South-West Asian nations on divergent growth paths since the 1960s. Iran entered the 1980s with an oil-fuelled GDP per capita of $2,673 - already seven times Pakistan's $383 - and although sanctions, war, and commodity cycles have repeatedly hammered Iranian incomes, the Islamic Republic has never relinquished its per-capita lead. Pakistan, in contrast, has built a more diversified but slower-growing economy that has struggled to outrun population expansion; its per-capita income only crossed the $1,000 mark in 2010 and reached $1,526 by 2024.

Two overlapping shocks define the contemporary turning point. First, the 2018 re-imposition of US secondary sanctions on Iran - coupled with the pandemic - slashed Iranian GDP from $542.8 billion in 2010 to $245.2 billion in 2020, a collapse that briefly narrowed the nominal GDP gap to $55 billion. Second, Pakistan's 2022-23 balance-of-payments crisis, triggered by global monetary tightening and domestic political turmoil, pushed inflation to 18.02 percent in 2024 and forced a $3 billion IMF standby arrangement. Both economies entered 2024 in recovery mode - Iran growing at 3.66 percent, Pakistan at 2.78 percent - but the trajectory of their convergence or divergence will be shaped as much by demography and geopolitics as by macroeconomic management.

Current State

By nominal output, Iran's $446.0 billion GDP in 2024 makes it the larger economy, though the advantage shrinks when adjusted for purchasing power. In PPP terms, Iran's GDP stands at $1.82 trillion while Pakistan's reaches $1.58 trillion, giving a ratio of 0.87 - far closer than the per-capita gap would suggest. Both economies remain heavily exposed to external pressures: Iran's dual-exchange-rate system and sanctions-imposed trade barriers distort domestic prices, while Pakistan's persistent twin deficits and high public debt keep it tethered to IMF programmes. Inflation, too, is a shared burden, but its intensity differs sharply. Consumer prices rose by 32.47 percent in Iran during 2024, driven by monetary expansion and a depreciating rial, whereas Pakistan's 18.02 percent inflation, though lower, still erodes household purchasing power in a country where over 50 percent of employment remains in the informal sector (World Bank 2024).

Labour-market indicators present a contrasting picture. Pakistan's unemployment rate of 5.42 percent in 2025 appears modest, yet labour-force participation is low, especially for women, and underemployment is widespread. Iran's 8.30 percent unemployment rate in the same year reflects a more industrialised labour market that has been squeezed by capital shortages and the exit of international firms. The demographic heft of the two nations is the defining difference: Pakistan's 251.3 million people outnumber Iran's 91.6 million by a factor of 2.7, which makes the per-capita income disparity particularly stark. In 2024, Iran's per-capita GDP of $5,000 compares with Pakistan's $1,526; even after PPP adjustments, the Iranian figure ($20,456) remains more than three times Pakistan's ($6,494).

Life expectancy offers a broader gauge of development divergence. The World Bank recorded 77.65 years for Iran in 2023, against 67.65 years for Pakistan, a difference that reflects gaps in sanitation, nutrition, and public-health infrastructure. Both countries are classified by the World Bank as lower-middle-income, yet Iran sits near the upper threshold while Pakistan lingers in the bottom half of that bracket. The sectoral composition reinforces the story: agriculture still accounts for 23.74 percent of Pakistan's GDP against a mere 10.80 percent in Iran, whereas industry - dominated by oil, gas, and petrochemicals - makes up 36.07 percent of Iranian output versus 20.25 percent in Pakistan. Services, at roughly 50 percent for both, contribute an almost identical share, though the character of those services is vastly different, from IT and finance in Pakistan to state-dominated distributive trades in Iran.

• GDP (USD, 2024): Pakistan $371.5B | Iran $446.0B
• GDP PPP (USD, 2024): Pakistan $1.58T | Iran $1.82T
• Per-capita GDP (USD, 2024): Pakistan $1,526 | Iran $5,000
• Per-capita GDP PPP (USD, 2024): Pakistan $6,494 | Iran $20,456
• GDP growth (2024): Pakistan 2.78% | Iran 3.66%
• Inflation (2024): Pakistan 18.02% | Iran 32.47%
• Unemployment (2025): Pakistan 5.42% | Iran 8.30%
• Life expectancy (2023): Pakistan 67.65 years | Iran 77.65 years
• Agriculture / Industry / Services (2024): Pakistan 23.74% / 20.25% / 50.73% | Iran 10.80% / 36.07% / 49.79%

Historical Trajectory (1960-2024)

A sixty-four-year lens shows Iran's economy repeatedly riding and falling with the price of oil, while Pakistan's has charted a steadier, if unspectacular, upward path. In 1960 the two nations started from comparable nominal bases - $3.7 billion for Pakistan and $4.2 billion for Iran - but even then Iran's per-capita income of $196 was more than double Pakistan's $82. The 1970s oil boom ruptured that near-parity: by 1980 Iran's GDP had reached $105.7 billion and its per-capita figure $2,673, whereas Pakistan's $31.1 billion output remained anchored to a largely agrarian structure, yielding per-capita income of just $383.

The subsequent decade was one of extreme volatility for Iran. The 1979 revolution and the Iran-Iraq war shattered production capacity, yet reconstruction and a price recovery pushed nominal GDP to a then-peak of $417.0 billion in 1990, with per-capita GDP surging to $7,575 - a level Pakistan ($480) would not approach for another three decades. Pakistan's GDP of $52.6 billion in 1990 meant the nominal ratio that year dropped to an all-time low of 0.13. The 1990s brought a different sort of stress: US sanctions intensified after 1995, oil prices softened, and Iran's GDP fell to $278.7 billion by 2000, trimming per-capita income to $4,350. Pakistan, meanwhile, had doubled its GDP to $99.5 billion and pushed per-capita income to $688, partially narrowing the ratio to 0.36.

The 2000s commodity super-cycle lifted Iran once more. By 2010 nominal GDP stood at $542.8 billion, the highest recorded in the data series, and per-capita output recovered to $7,181. Pakistan also benefited from global growth and remittance inflows, reaching $196.7 billion in GDP and $1,063 per capita, but the income gap widened again. The 2010-2020 decade exposed the fragility of both models. The imposition of US secondary sanctions after 2018, combined with the COVID-19 pandemic, caused Iran's economy to shrink from $542.8 billion in 2010 to $245.2 billion in 2020, a nominal decline of 55 percent, while per-capita income collapsed to $2,848 - approaching Pakistan's $1,327. Pakistan, although facing its own balance-of-payments episodes, managed to grow output to $300.4 billion, keeping the GDP ratio at 0.82 in 2020.

The 2024 snapshot captures a partial Iranian recovery. GDP rebounded to $446.0 billion and per-capita income to $5,000, while Pakistan reached $371.5 billion and $1,526. The output ratio of 0.83 sits almost exactly in line with the 2000 and 2020 readings, yet the per-capita ratio of 0.31 is far below the 0.47 recorded in 2000, underlining how Pakistan's population growth continuously erodes the gains of steady GDP accumulation. The table below summarises the seven historical benchmarks from the World Bank national accounts series.

Year	Pakistan GDP (USD B)	Iran GDP (USD B)	Pakistan GDP per capita (USD)	Iran GDP per capita (USD)
1960	3.7	4.2	82	196
1980	31.1	105.7	383	2,673
1990	52.6	417.0	480	7,575
2000	99.5	278.7	688	4,350
2010	196.7	542.8	1,063	7,181
2020	300.4	245.2	1,327	2,848
2024	371.5	446.0	1,526	5,000

The trajectory reveals that Iran's economy is structurally more cyclical, its absolute size swinging by hundreds of billions of dollars within a few years, while Pakistan's path approximates a low-volatility growth line interrupted by periodic stabilisation crises. The per-capita series exposes a stubborn truth: Iran's median citizen, even after the 2020 collapse, retains a material welfare advantage that Pakistan is unlikely to close in the next decade without a sharp acceleration in labour-intensive exports and productivity gains.

Per Capita Reality

No single metric captures the developmental chasm between Pakistan and Iran better than the 2024 per-capita GDP ratio of 0.31. With $1,526 in nominal terms, Pakistan's per-capita income was barely 31 percent of Iran's $5,000, a gap that has widened markedly since 2000 when it stood at 47 percent. The reversal is not a story of Iranian enrichment - Iran's 2024 per-capita level is still one-third below its 1990 peak - but rather of Pakistan's inability to lift incomes fast enough to absorb a population that has grown from 143 million in 2000 to 251.3 million today.

Purchasing-power adjustments soften the blow but do not eliminate it. Iran's PPP-based per-capita GDP of $20,456 is 3.15 times Pakistan's $6,494, a ratio of 0.32, virtually identical to the nominal ratio. The persistence of that multiple despite different exchange-rate and price-level dynamics indicates that the productivity gap is deep and structural. It is rooted in Iran's capital-intensive resource sector, which generates high returns per worker, versus Pakistan's reliance on smallholder agriculture and a fragmented, informal services economy. Even within PPP terms, the average Pakistani worker produces less than one-third of the output of an Iranian counterpart.

The gap in life expectancy - 77.65 years versus 67.65 years in 2023 - reinforces the message that higher average income translates into better-quality public goods and health outcomes. Iran's longer history of universal primary education and state-led healthcare investment, financed by oil windfalls in previous decades, has left a durable imprint. Pakistan's social indicators have improved, but the pace has been slow and uneven across provinces. The convergence challenge is compounded by climate vulnerability: agricultural shocks, flooding, and heat stress disproportionately affect Pakistan's low-income households, creating downward pressure on real incomes that is not captured in the annual GDP series.

While unemployment in Pakistan is recorded at a comparatively low 5.42 percent for 2025, that headline figure conceals a vast informal workforce with precarious earnings. Iran's higher unemployment rate of 8.30 percent reflects, in part, rising participation among educated youth and a formal sector that has struggled to absorb labour amid capital constraints. Per-capita comparisons will remain the most politically resonant barometer for policy makers because they directly influence social stability and migration pressures on both sides of the border.

Sector Composition

Agriculture, industry, and services paint a portrait of two economies with markedly different structural emphases yet a near-identical share of services. In 2024 agriculture accounted for 23.74 percent of Pakistan's GDP, a share more than double Iran's 10.80 percent. This heavy reliance on crop farming, livestock, and textiles-related value chains makes Pakistan acutely sensitive to water availability and monsoon patterns. According to the World Bank, agriculture employs roughly 37 percent of the Pakistani labour force, far above its GDP share, indicating a large productivity gap that feeds rural poverty.

Iran's industrial weight - 36.07 percent of GDP versus Pakistan's 20.25 percent - is the mirror image of its agricultural under-representation. The industrial component is dominated by crude oil and natural gas extraction, refining, and petrochemicals, sectors that generated almost two-thirds of Iran's export earnings in 2023 (OPEC annual statistical bulletin). Downstream manufacturing, including automotive assembly and steel, has grown through import-substitution policies, but remains dependent on state subsidies and is vulnerable to sanctions-induced spare-parts shortages. Pakistan's industry, by contrast, is led by textiles and apparel, cement, and food processing; its share of manufacturing in GDP has stagnated near 13 percent for the past decade, according to the Pakistan Bureau of Statistics.

Services contribute an almost identical share - 50.73 percent for Pakistan and 49.79 percent for Iran - but the composition is structurally different. Pakistan's services sector is skewed towards low-productivity wholesale and retail trade, transport, and telecommunications, with a notable though small IT export cluster that has grown to roughly $3.2 billion in FY2024 (State Bank of Pakistan). Iran's services economy is heavily state-influenced, revolving around financial intermediation, real estate, and public administration, with tourism and private business services constrained by international restrictions. The near-identical services-share figure therefore hides a productivity gulf that feeds directly into the per-capita divergence. The industrial base gives Iran a higher output ceiling during oil upswings, while Pakistan's agricultural dominance anchors a large share of the population to low-value-added work, limiting the pace of poverty reduction.

Trade Relationship Between the Two

Bilateral merchandise trade between Pakistan and Iran remains modest, constrained by sanctions, poor overland connectivity, and limited complementarity in formal sector production. According to Pakistan's Federal Board of Revenue, annual two-way trade has rarely exceeded $1.5 billion in recent years, a tiny fraction of each country's total external commerce. For context, Pakistan's total goods imports stood at roughly $55 billion in FY2024 (Pakistan Bureau of Statistics), meaning Iran accounted for well under 2 percent of inbound shipments.

The trade basket is asymmetric. Iran supplies Pakistan predominantly with liquefied petroleum gas (LPG), bitumen, base oil, and fresh fruits, capitalising on proximity to the energy-short Pakistani market. Pakistan's exports to Iran are led by rice, textiles, surgical instruments, and powdered milk, though shipments are often disrupted by banking channel restrictions and irregular customs procedures. Smuggling, particularly of Iranian diesel and petrol across the Balochistan border, is widely acknowledged by both governments but not captured in official trade statistics, and it distorts local fuel markets in Pakistan's western provinces.

Sanctions have been the dominant force shaping formal trade. After 2018, even payment mechanisms based on barter or local currencies faced difficulties because of the risk of secondary-sanctions exposure for Pakistani banks. A long-planned Iran-Pakistan gas pipeline, intended to deliver Iranian natural gas to energy-starved Punjab, has been stalled for over a decade, with Pakistani officials citing force majeure linked to sanctions-related financing obstacles. Despite the signing of a bilateral preferential trade agreement in March 2024, which sought to liberalise tariffs on a few dozen items, actual implementation remains slow, and traders in both countries report that informal hawala channels still underpin most settlement (UN Comtrade note on non-reporting of certain Iran-destination shipments).

The trade relationship, therefore, is one of unrealised potential. Both economies are natural neighbours with deep historical and cultural links, but geopolitical constraints and divergent economic structures have kept official commerce at a residual level. The future trajectory hinges on the path of nuclear negotiations and the willingness of regional financial institutions to offer sanctions-proof clearing mechanisms - a scenario that remains uncertain.

Demographics & Future Outlook

Demography is the single most powerful force shaping the medium-term trajectories of Pakistan and Iran. With 251.3 million inhabitants in 2024, Pakistan is the world's fifth-most-populous country and is projected by the United Nations DESA to reach roughly 380 million by 2050. This immense youth bulge - about 64 percent of the population is under 30 - offers a potential demographic dividend if sufficient jobs can be created, but it simultaneously imposes mounting pressure on water, education, and public-health infrastructure. Iran's 91.6 million people, while large by regional standards, represent a population that has already begun to age; the median age is approximately 32 years (Statistical Centre of Iran, 2023), and fertility has dropped below replacement level, implying a shrinking working-age cohort from the late 2030s onward.

The labour-market implications are stark. Pakistan must generate roughly 1.5 million new jobs per year to keep unemployment stable, according to the IMF Article IV consultation (2024), a task that demands sustained GDP growth of 6-7 percent - well above the 2.78 percent recorded in 2024. Iran's challenge is different: with a slower-growing but better-educated labour force, it needs to raise participation rates and move workers from state-subsidised, low-productivity jobs into competitive private-sector employment. The unemployment figures for 2025 - 5.42 percent in Pakistan and 8.30 percent in Iran - do not capture the quality of employment, which in Pakistan is predominantly informal and in Iran increasingly precarious.

The IMF World Economic Outlook (October 2024) sees both economies growing at a moderate pace over the next five years, but warns that Pakistan's debt-servicing costs and external financing needs will keep per-capita income growth sluggish without deep structural reforms. Iran's outlook is contingent on the geopolitical environment: a renewed nuclear deal could unleash exports and foreign direct investment, pushing GDP well above its 2024 level, while further sanctions escalation would perpetuate high inflation and capital flight. The World Bank's Human Capital Index scores Iran noticeably above Pakistan, reflecting decades of greater investment in schooling and health, a gap that demographic shifts alone will not close quickly.

FAQ

Which country has the larger economy: Pakistan or Iran?

In 2024, Iran's nominal GDP of $446.0 billion is larger than Pakistan's $371.5 billion, giving a size ratio of 0.83. Adjusted for purchasing power parity, Iran's GDP stands at $1.82 trillion compared with Pakistan's $1.58 trillion, a narrower ratio of 0.87.

How does GDP per capita compare between Pakistan and Iran?

Iran's 2024 per-capita GDP is $5,000, while Pakistan's is $1,526 - a ratio of just 0.31. Even in PPP terms, the gap remains large at $20,456 versus $6,494.

Why is Iran's GDP per capita so much higher than Pakistan's?

Iran's higher per-capita income is driven by three factors: a much smaller population (91.6 million vs. 251.3 million), a capital-intensive oil and gas sector that generates high value per worker, and historically heavy state investment in education and health that raised labour productivity. Pakistan's economy is more agrarian and its rapid population growth dilutes aggregate GDP gains.

How has Iran's economy been affected by international sanctions?

Sanctions have caused severe volatility. Between 2010 and 2020, Iran's nominal GDP shrank from $542.8 billion to $245.2 billion, and per-capita income fell from $7,181 to $2,848. Recovery to $446.0 billion in 2024 has been partial and remains fragile, with inflation at 32.47 percent and limited access to global financial channels.

What are the main sectors driving Pakistan and Iran's economies?

In 2024, Pakistan's economy was composed of agriculture (23.74%), industry (20.25%), and services (50.73%). Iran's structure was agriculture 10.80%, industry 36.07% - dominated by oil, gas, and petrochemicals - and services 49.79%. The industrial share is the most important differentiator, as it underpins Iran's export earnings and state revenues.

How does trade between Pakistan and Iran look?

Bilateral trade is small, generally below $1.5 billion annually, according to Pakistan's customs data. Iran mainly exports LPG, bitumen, and food products, while Pakistan ships rice, textiles, and surgical instruments. Sanctions, banking restrictions, and poor infrastructure limit formal trade, although informal fuel smuggling is widespread.

What is the inflation situation in both countries?

In 2024, Iran's inflation was 32.47 percent, driven by a depreciating rial and monetary expansion under sanctions. Pakistan's inflation stood at 18.02 percent, elevated by energy-price adjustments and currency depreciation associated with its IMF programme.

How do PPP-adjusted figures change the economic comparison?

Purchasing-power parity adjustments reduce the GDP gap: Iran's PPP GDP of $1.82 trillion is only about 15 percent larger than Pakistan's $1.58 trillion, compared with a 20 percent nominal gap. The PPP per-capita ratio, however, stays at 0.32, showing that the real income advantage remains over threefold.

Which country has a more favourable demographic outlook?

Pakistan possesses a large, young workforce with a median age in the early 20s, offering a demographic dividend if employment can expand quickly enough. Iran is further along the demographic transition, with fertility below replacement and an aging profile that will slow labour-force growth but also reduce dependency ratios in the near term.

What is the unemployment rate in Pakistan versus Iran?

For 2025, the World Bank and national statistical agencies report unemployment at 5.42 percent in Pakistan and 8.30 percent in Iran. The lower Pakistani rate masks substantial underemployment and low-quality informal work, while Iran's higher figure reflects barriers to private-sector job creation under sanctions.