The International Monetary Fund estimates that Iran's economy fell into a recession this year that will get worse next year as a result of renewed U.S. sanctions on Tehran.
In its World Economic Outlook released late on October 8, the IMF said Iran's oil-driven economy is expected to shrink by 1.5 percent this year as a result of declining oil exports, with the drop in economic output accelerating to 3.6 percent in 2019.
In May, before U.S. President Donald Trump announced that he was reinstating sanctions against Tehran, the IMF had projected Iran's economy would grow by 4 percent in 2018 and 2019.
The IMF said the contraction in the Iranian economy that it now is projecting over the next two years is due to 'reduced oil production' under the sanctions.
Washington has already imposed a first round of sanctions on Iran's economy, while warning Iranian oil clients to start looking for other suppliers. A second round of sanctions targeting Iran's oil sector is due to go into effect on November 5.
The sanctions are being reimposed as a result of Trump's decision to withdraw the United States from Iran's 2015 nuclear deal with world powers, which had lifted sanctions in exchange for curbs on Iran's nuclear activities.
Iranian crude exports, which reached a peak of some 2.5 million barrels after sanctions were lifted in 2016, have plunged by over 500,000 barrels a day and are expected to dive further when expanded sanctions on oil take effect next month.
Trump administration officials have said their goal is to slash Iranian oil exports to 'zero.' Nut other world powers that signed the agreement -- Russia, China, Britain, Germany, and France -- have they will help Iran circumvent the sanctions and keep selling its oil.
While the IMF's cut in Iran's growth forecast was particularly dramatic, it also reduced its growth forecast for the Middle East region as a whole, citing the slump in the Iranian economy and increased energy costs due to soaring oil prices.
The IMF also sees a darker outlook for the world economy mostly as a result of tariff wars between the United States and China, the two largest economies. It is now projecting that global growth will average 3.7 percent in 2018 and 2019, down from a projection of 3.9 percent this spring.
'U.S. growth will decline once parts of its fiscal stimulus go into reverse,' IMF chief economist Maurice Obstfeld said. 'Notwithstanding the present demand momentum, we have downgraded our 2019 U.S. growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation.'
The IMF sees China's 2019 growth declining to 6.2 percent from the previously forecast 6.4 percent.
With reporting by AFP and Reuters
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