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Forecast Says Sharp Drop In Iran's Economic Growth Rate

IRAN -- A group of protesters chant slogans at the main gate of old grand bazaar in Tehran, Iran, Monday, June 25, 2018.

The Iranian Parliament's Research Center has forecast two dystopian economic growth rates for Iran by the end of the Iranian year (March 20, 2019) as a result of the U.S. pull-out from the nuclear deal with Tehran.

Based on these two scenarios, the center's forecast for Iran's economic growth rate in the next year (March 2019-March 2020) would be between -3.8 percent and -5.5 percent.

Iran's economic growth rate was 3.7 percent last year (March 2017 – March 2018) according to data largely provided by the Islamic Republic authorities.

The Research Center of the Iranian Parliament made the forecasts excluding the impact of the government's probable measures to counter the effect of U.S. sanctions. This is "a situation in which the government has no active policy to nullify or actively counter the sanctions," the report said.

The two forecasts in each case are based on either the European Union following the United States’ path in imposing sanctions, or the EU's relative cooperation with Iran despite sanctions.

In the optimistic scenario, Iran's oil exports in the second half of the year will drop by 500 barrels per day. Other assumptions are based on a 22 percent fall in vehicle manufacturing in the summer, a 2-5 percent drop in other industries except foodstuff, chemicals, and metals and a 9 percent drop in imports in the second half of the year.

The most important assumption in the pessimistic forecast is a 1 million barrel per day drop in oil exports in the second half of the Iranian year (October 2018 – March 2019).

The pessimistic forecast also includes a 45 percent drop in vehicle manufacturing in the current summer, a 5 percent decline in other industries, and an 18 percent drop in imports in the second half of the year.

A recent report by Reuters indicated an eye-catching and continuous drop in Iran's oil exports in recent months, particularly since the U.S. withdrawal from JCPOA and the return of sanctions against Tehran.

Following the U.S. withdrawal from JCPOA, U.S. officials have vowed to reduce Iran's oil exports to a minimum and encourage more countries to stop purchasing oil from Iran.

The second part of U.S. sanctions against Iran, which start in November, targets Iran's oil and gas exports and banking transactions.

The Iranian Parliament's Research Center's report suggests that the government decrease its reliance on imports and activate other sectors of the economy such as housing as a policy option.

Iran's economic growth rate dropped to -6.8 percent in 2012 and -1.9 percent in 2013 mainly as a result of sanctions; following the nuclear deal with the West in 2015, the rate improved and reached 12.5 percent, although it later dropped to around 3.7 percent last year.