Iran economy shows small ‘contraction’ over oil ban Impact spilling over into other sectors: IMF

DUBAI, Nov 11, (AFP): Economic performance in Iran has shown a small contraction because of a Western ban on oil exports whose impact is spilling over into other sectors, the International Monetary Fund said on Sunday. “The projection that we have shows small contraction in Iran economy during 2012 ... and an increase in inflationary pressure in the same period,” the IMF’s head of Middle East and Central Asia, Masood Ahmed, told AFP in Dubai where he presented the Fund’s Regional Economic Outlook report.
IMF figures released last month forecast an economic contraction in Iran of 0.9 percent this year, and mild growth of 0.8 percent in 2013. The figures compare to 2.0-percent growth in 2011 and 5.9 percent in 2010.


Deterioration
“This deterioration reflects both lower oil production, which is in part because of the external constraints and the spillover impact of that on the rest of the economy,” he said. According to IMF projections, Iran’s oil exports have dropped to 1.25 million barrels per day this year, compared with 2.14 million bpd last year. He pointed out that the drop took place even though “other parts of the economy have done well, such as agriculture.”


“It is important to remember that the economy is quite a diversified economy in Iran. The oil as a share of the GDP is not as large as other oil exporters,” Ahmed said. Agriculture contributes some 10 percent of the Islamic republic’s GDP, while industry, including oil, accounts for about 40 percent, and services amount to about half the output. The IMF official pointed out that the projections did not take into account the sharp depreciation in Iran’s currency, the rial. “These projections were done before the very significant depreciation of the currency and the related increased uncertainty, which will likely have a further negative impact on the economic performance in the year ahead,” he said.

Sanctions on oil exports have caused a shortage of foreign currency in Iran, sparking the collapse last month of the rial and sending inflation soaring. The IMF put Iran’s inflation this year at 25.2 percent, compared with 21.5 percent last year. An EU ban on oil imports from Iran came into force in July. Previously, European countries imported about 20 percent of Tehran’s oil exports.

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