Iran’s Digital Economy Shrinks to 4% of GDP, Deputy ICT Minister Reports

Ehsan Chitsaz, Deputy for ICT Policy and Digital Economy Planning, reported that the share of digital economy firms in Iran’s knowledge-based ecosystem has reached 21%, while the sector’s contribution to GDP has fallen to approximately 4%, down from 4.72% in previous years.

This contraction reflects a 21% decline in demand across the country’s technology ecosystem, including both applications to the Innovation and Prosperity Fund and scale-up companies.

Investor Flight from Domestic Incentives

Chitsaz attributes the reduced uptake of government-backed financing to more attractive returns in parallel financial markets. When alternative financing options offer yields of 65–66%, even subsidized government loans at 23% interest fail to attract participants.

He emphasized that low demand for domestic financing signals a perceived decline in the sector’s profitability and long-term potential. High exit rates relative to new entries underscore the shrinking share of the digital economy.

Addressing AI and Productivity Gaps

Describing the digital economy as a vital infrastructure for knowledge-based productivity, Chitsaz highlighted its role in leveraging big data and AI to outperform traditional economic sectors.

He outlined collaboration between the Ministry of ICT, the Innovation and Prosperity Fund, and the Vice-Presidency for Science and Technology to re-engage investors.

Transition to Data-Driven Governance

Chitsaz stressed the need to shift governance from intuition-based decisions to data-driven policy-making. New initiatives with the Statistical Center of Iran aim to continuously monitor government interventions, comparing official data with private sector reports to validate findings and identify policy gaps.