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World Bank And IMF More Pessimistic About Iran’s Economy

In this Wednesday, Feb. 6, 2019, photo, a shopkeeper arranges items inside the window display at the Kourosh shopping mall, in Tehran, Iran. The economy faces multiple struggles as the country marks the 40th anniversary of the Islamic Revolution.

The World Bank (WB) and the International Monetary Fund (IMF) released new reports, saying Iran’s GDP growth is worse than what they had predicted in their last forecasts.

The World Bank says Iran’s GDP would shrink 3.8% in 2019 and IMF predicts even a worse forecast; 6% contraction.

World Bank’s new forecast is 0.2% less than its latest report, published in January and 7.9% less than its June 2018 forecast.

World Bank’s estimates about Iran’s GDP growth during last three reports
June 20184.1%4.1%4.2%
January 2019-1.5%-3.6%1.1%
April 2019-1.6%-3.8%0.9%

IMF also amended its latest published forecasts with more pessimistic projections.

Both World Bank and the IMF say Iran’s GDP contraction is due to the impact of U.S. sanctions, especially the huge decline of Iran’s oil exports.

IMF projections are more pessimistic than those of the World Bank, putting Iran’s GDP contraction level for 2018 and 2019 at 3.9% and 6% respectively.

IMF’s forecast about Iran’s economy
Economic indicators201820192020
GDP growth- 3.9%- 6%0.2%
Unemployment rate13.9%15.4%16.1%

The U.S. withdrew from the 2015 nuclear agreement with Islamic Republic in May 2018 and reimposed sanctions on Iran’s financial and industrial sectors as well as oil exports.

However, the Trump administration offered sanctions waivers to eight countries in November 2018 allowing them to continue buying Iranian oil for six months (by May 2). Only China, India, South Korea, Japan and Turkey used the waivers and imported Iranian oil. Iraq also received a waiver to purchase electricity from Iran.

Sanctions have more than halved Iran’s oil exports to around 1 million barrels per day. The U.S. plans to decide on wavier extensions next month, but it is not clear which countries would receive exceptions and for what amounts of oil.

Reuters has reported that Japanese and Indian refineries have already halted Iranian oil purchase orders to wait out for a decision on waivers.

Some reports predict Washington’s new waviers would allow five countries to import 850,000 b/d Iranian oil.

World bank’s new report, which covers the Middle East and North Africa countries (MENA), says only Iran’s economy would shrink in 2019 among all the countries in the region, including Yemen, which its GDP is expected to grow 2.1% in 2019 and 10% in 2020 after several years of economic contraction due to its civil war.

IMF also predicts GDP contraction for only Iran and Sudan among MENA countries in 2019.