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Iran Reports A Huge Drop In GDP As Sanctions Halt Oil Exports

File photo: Iran's Khodro car factory, which has stopped production due to withdrawal of foreign partners under pressure of U.S. sanctions.

Iran's gross domestic product, including oil production, shrank 4.9 percent in fiscal year 2018-19 compared with the year before, according to the latest report by Statistical Center of Iran's (SCI).

Based on the report, published on SCI's website on June 16, Iran's overall GDP figure stood at 7,130 trillion rials ($52 billion at current market exchange rates) for the Iranian calendar and fiscal year (March 21, 2018-March 21, 2019).

The production of the two groups of industry and agriculture contracted 9.6 percent and 1.5 percent, respectively, while the services group remained almost unchanged. Economic growth, excluding oil production, stood at -2.4 percent, the report added.

SCI's previous reading of Iran's economic growth showed that GDP had a contraction of -3.8 during the first three quarters of the last fiscal year compared with the corresponding period of the previous year.

After dropping the Joint Comprehensive Plan of Action (JCPOA) or Tehran's nuclear deal with world powers in May 2018, Washington imposed two consecutive batches of sanctions on Iran, aiming to push its oil exports to zero and seriously limit its international banking and trade.

Immediately after the imposition of sanctions, Iran's oil exports started to shrink and dropped from more than two million barrels per day (bpd) in March 2018 to below 400,000 bpd a year later, the lowest since the 1980s.

This has grave consequences for the Islamic republic as nearly half of state finances depend on oil income. Before the U.S. tightened its oil sanctions on May 1, Iran repeatedly threatened some sort of retaliation if it was unable to sell its oil.

On May 12 and June 13 tankers in the Gulf of Oman were targets of mysterious attacks, that Washington and its allies have blamed on Iran.

Tehran has rejected the accusations, saying the origin of the attacks are to be "suspicious" and some officials have even alleged that they might have been orchestrated to lay the ground for war.

For the second consecutive year, Iran's economy is expected to shrink as inflation could reach as high as 40 percent, reported Reuters in April, citing an International Monetary Fund senior official. Iran's economy decreased 3.9 percent last year, according to the IMF, which predicts it will shrink 6 percent this year.

Furthermore, according to the IMF, Iran's share in the world economy since the downfall of the pro-West monarch, Shah Mohammad Reza Pahlavi, four decades ago, has been almost halved from nearly 2 percent to 1.1 percent.

The figure is expected to drop further, reaching 1 percent in the coming years. In the meantime, the World Bank estimates that Iran's economic growth will be soon the lowest in the world, only slightly ahead of Nicaragua. The IMF says that only Iran and Sudan are expected to have negative economic growth in 2019.