DUBAI — The International Monetary Fund on Tuesday worsened its forecast for Iran’s recession as US sanctions bite, with Tehran’s slump denting overall growth in the Middle East and North Africa.
The global lender’s World Economic Outlook projected Iran’s economy will shrink by a massive 6.0 percent this year, its worst performance since it contracted by 7.7 percent in 2012.
The latest figure represented a sharp deterioration from October’s prediction of a 3.6 percent contraction, as US sanctions batter the Islamic republic’s crucial oil sector.
The report also estimated that Iran’s economy, the second largest in the region behind Saudi Arabia, shrunk by 3.9 percent in 2018, as opposed to 1.5 percent projected earlier.
The prediction of deeper pain for Iran, lower oil growth and civil strife saw the IMF cut its overall forecast for the Middle East and North Africa to 1.3 percent, down 0.9 percent from January.
“The outlook for the region is weighed down by multiple factors, including slower oil GDP growth in Saudi Arabia… US sanctions in Iran and civil tensions and conflict across several other economies, including Iraq, Syria, and Yemen,” the IMF said.
It maintained its projections for Saudi Arabia, saying the region’s leading economy is expected to grow by a muted 1.8 percent this year and 2.1 percent in 2020.
The IMF said it expected the kingdom’s growth, which reached 2.2 percent last year, to stabilise at a modest rate in the medium term due to the subdued outlook for oil prices and output.
Overall the wider regional economy is projected to improve in 2020 to a healthy growth rate of 3.2 percent, the IMF said.
The international lender expects oil prices to average around $59 a barrel this year and next, down from its October projections of above $65 a barrel.