Iran's inflation rate will jump to over 40 percent by the end of the year even as its economy sinks into a deep recession, the International Monetary Fund is projecting.
In a report on Middle Eastern economies released on November 13, the IMF projected that U.S. sanctions will push Iran's economic output down by 1.5 percent this year, with its recession deepening into a 3.6 percent contraction next year.
"This largely reflects the expected impact of the reimposition of U.S. sanctions on Iran, which is likely to reduce Iranian oil production and exports significantly over the next two years at least," the IMF said.
The economic reversal comes after Iran's economy saw a surge in growth of 12.5 percent in 2016 after global sanctions were lifted under Iran's 2015 nuclear deal with world powers. Its economy expanded by a more modest 3.7 percent last year.
The U.S. move to reimpose sanctions on Iran came after President Donald Trump's decision to withdraw the United States from the nuclear deal. While other world powers have vowed to keep honoring the deal as long as Iran honors its curbs on nuclear activities, that has not prevented Iran's economy from falling into a slump in response to the U.S. sanctions.
The IMF's Mideast Director Jihad Azour said one of the most pressing issues facing Iran as it deals with the impact of U.S. sanctions is the need to align the official currency exchange rates for the Iranian rial with black market rates.
The sharp rise in oil prices since Washington announced it was reimposing sanctions in May has helped to buoy Iran's economy and that of other oil exporters in the Gulf region, but it also is helping to stoke inflation, the IMF said.