Page 14 - IRANRptDec19

3.1​ ​Macroeconomic outlook
IMF sees no additional impact of sanctions on Iran’s economy in 2020
Crunch year for Iran as World Bank forecasts 8.7% GDP contraction in 2019/2020
The International Monetary Fund (IMF) does not see US sanctions having an additional impact on Iran’s economy next year. The IMF forecasts that Iran’s economy will contract by 9.5% this year but also that Iranian GDP growth will be flat next year.
“The estimate is that ... sanctions that were reintroduced last year and tightened this year, next year will not have an additional impact,” Jihad Azour, director of the IMF’s Middle East and Central Asia Department, was cited as saying by Reuters on October 28.
The same day, US Treasury Secretary Steven Mnuchin, on a visit to Jerusalem, told Israeli Prime Minister Benjamin Netanyahu: "We will continue to ramp up [sanctions on Iran], more, more, more ... I just came from a very productive working lunch with your team. They gave us a bunch of very specific ideas that we will be following up."
The IMF has also predicted that Iran will have a fiscal deficit of 4.5% this year and 5.1% next year. Iran would need oil priced at $194.6 a barrel to balance its budget in 2020, it said. At the end of last week, international benchmark Brent crude closed trading at just above $62 a barrel.
On the inflation front, the Fund said Iran can expect 35.7% this year and 31% next year.
It reiterated its recommendation that the Iranian authorities should align the Iranian rial (IRR) official exchange rate with the market rate to control inflation. Looking at trade, the IMF forecast Iran’s exports of goods and services will drop to $60.3bn this year from $103.2bn last year, and will fall further to $55.5bn in 2020.
Iran’s economy is set to shrink by as much as 8.7% in 2019/2020 following on from the 2018/2019 contraction of 4.9% as crushing US sanctions continue to exact a heavy toll, the World Bank said in an autumn economic update​ ​released on October 9.​ It added that the Islamic Republic may eke out growth of 0.1% in 2020/2020.
“The expected deterioration in economic growth would mean that by the end of 2019/20 the economy would be 90% of its previous size compared to just two years earlier,” the report noted.
In its outlook section, the update said: “The medium-term economic outlook remains challenging. The baseline assumption for the medium-term rests on continued oil exports of around 500 thousand barrels per day on average in 2019/20 and the following years.”
As things stand, Iran is battling to keep up a reasonable level of lifeline oil exports in the face of a campaign by the US to drive all Iranian crude off world markets.
The report added: “In the course of the next two years (2020/21 to 2021/22) the economy is expected to grow at 0.5 percent annually, from a considerably smaller base. Inflationary pressures are expected to moderate but annual inflation is expected to remain above 20 percent which is considerably higher
14​ IRAN Country Report​ December 2019 www.intellinews.com