Iran’s Economy to Shrink, Before Ascending in 2020: World Bank

Latest World Bank projections show Iran’s gross domestic product will continue to contract in 2019, before reversing gear in 2020. According to WB’s latest “World Economic Prospects” report published after the New Year, Iran’s GDP is bracing for further contraction in 2019 to reach -3.6% after experiencing an estimated -1.5% in 2018 before stabilizing in […]

Latest World Bank projections show Iran’s gross domestic product will continue to contract in 2019, before reversing gear in 2020.

According to WB’s latest “World Economic Prospects” report published after the New Year, Iran’s GDP is bracing for further contraction in 2019 to reach -3.6% after experiencing an estimated -1.5% in 2018 before stabilizing in the positive territory at 1.1% in 2020 and 2021.

The estimates for 2018, 2019 and 2020 show -5.6%, -7.7% and -3.1% changes compared to World Bank’s June 2018 projections.

US Sanctions Impact

The main contributing factor to contraction of Iran’s economic growth goes back to US sanctions imposed against the Islamic Republic last year, according to Financial Tribune.

US President Donald Trump announced on May 8 his withdrawal from the nuclear deal Iran had signed with world powers in 2015 and rolled out a new sanctions regime against Tehran, described as “toughest ever” in the following months.

The first round of renewed US sanctions reimposed on Aug. 7 prohibits Iran’s purchase of US dollars and precious metals, part of a larger move that attempts to cut the country off from the international financial system. A second tranche of sanctions on Iran’s oil and gas sector took effect on Nov. 4.

Oil Factor

Iran will see its crude exports severely curtailed for a third month in January, as it is struggling to find new buyers amid fresh US sanctions even though its traditional customers secured waivers, according to tanker data and industry sources.Iran’s crude exports in November plummeted to below 1 million barrels per day, from regular sales of 2.5 million bpd before sanctions were imposed in May, and taking them back to where they stood during the previous round of sanctions in 2012-16, Reuter reported.

Buyers said plunging exports in November, which will severely hit the Islamic Republic’s budget revenues, were caused by a total lack of clarity of what volumes they were allowed to purchase under the new US sanctions.