An Iranian woman shops at a drugstore at the Nikan hospital in Tehran. The Iranian economy is expected to go into recession next year. AFP
An Iranian woman shops at a drugstore at the Nikan hospital in Tehran. The Iranian economy is expected to go into recession next year. AFP
An Iranian woman shops at a drugstore at the Nikan hospital in Tehran. The Iranian economy is expected to go into recession next year. AFP
An Iranian woman shops at a drugstore at the Nikan hospital in Tehran. The Iranian economy is expected to go into recession next year. AFP

Iran to face recession as US sanctions bite


Sarmad Khan
  • English
  • Arabic

Iran’s economy is likely to contract this year and next, heading into a recession on the back of sharp declines in oil exports and a further slump in already-low foreign investment inflows as the US reimposes sanctions on Tehran.

After steadily growing in 2017, economic activity in Iran is forecast to contract by 1.5 per cent and 3.6 per cent in 2018-19, the World Bank said in its World Economic Outlook released on Thursday. Fitch Solutions, a part of Fitch Group, estimates Iranian gross domestic product to contract by 4.3 per cent in 2019 and expand beyond that time frame - albeit at a modest rate.

“Our core view is for the re-imposition of US nuclear-related sanctions to cause a sharp slowdown in the Iranian economy in 2018 and trigger a recession in 2019, as exports and investment inflows decline, and rising inflation and high unemployment weigh on consumption,” the Fitch report said.

Weakness of the Iranian rial and fast-rising inflation will also weigh on domestic investment and consumption, both the World bank and Fitch Solutions’ reports noted.

The World Bank expects the annual inflation rate to exceed 30 per cent on average in 2019, up from 9.6 per cent last year. Although the depreciation of the currency could help improve non-oil exports, it will not be enough to offset the loss of oil exports, which still account for 40 per cent of the government’s revenues and export receipts.

Earlier this week Fitch estimated inflation in Iran to average 33.2 per cent in the 2018-2019 financial year that started in April, nearly double its previous forecast of 17 per cent. It expects the rial to continue to weaken further on the back of continued expansion of Iran’s monetary base.

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WATCH: Tim Marshall on Iran sanctions

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The rising cost of living led to public dissent and mass protests in several Iranian cities earlier this year.

US sanctions on Iranian oil imports will come into force in early November, however, crude exports dropped off sharply over August and September in the lead-up to sanctions, Fitch Solutions noted, citing tanker tracking data.

“This trend is already playing out even before the [sanctions] activation date, as importers of Iranian oil attempt to either comply or qualify for limited sanctions waivers,” Fitch Solutions noted.

The state of Iran’s economy is worsening as the deadline of re-imposition of sanctions by US over its nuclear programme nears. The sharp fall in the value of the Iranian currency in the unofficial market, inflationary pressures, and high unemployment rates, especially among youth - estimated at 30 percent in 2018 by the World Bank and International Labor Organization - could lead to stagflation. The financial woes are compounded by the structural weaknesses and deteriorating asset quality of Iran’s financial institutions, which are unable to access the international financial system.

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Read more:

Iranian inflation set to rise sharply as US sanctions deadline approaches

Iran central bank authorised to intervene in foreign exchange market to defend rial

Mike Pompeo heads talks to counter 'malign' Iran

US to close consulate in Basra over Iran security risk

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Iran's rial has hit multiple record lows this year against the US dollar. The demand for the dollar is stoked by concerns that the impact of US sanctions would be felt beyond the country’s crude shipments and will affect Iran’s broader export sector.

Last month, Iran authorised the central bank to intervene in the foreign exchange market in defence of its currency. A top government body, headed by President Hassan Rouhani and the heads of parliament and the judiciary, "gave the central bank governor the necessary authority to intervene in the foreign exchange market and to manage it", Reuters cited state TV as saying at the time.

“Declining foreign exchange inflows and rising money supply growth will fuel depreciation of the rial - which has already suffered severe losses in the ‘free market’ over the year-to-date and send inflation higher,” the Fitch report said. “Coupled with very limited credit availability this will constrain private domestic investment and consumption.”

At a glance

Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.

 

Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year

 

Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month

 

Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30 

 

Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse

 

Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth

 

Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances

The specs

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Creator: Mike White

Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell

Rating: 4.5/5

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'Outclassed in Kuwait'
Taleb Alrefai, 
HBKU Press 

Our Time Has Come
Alyssa Ayres, Oxford University Press

Look north

BBC business reporters, like a new raft of government officials, are being removed from the national and international hub of London and surely the quality of their work must suffer.

UAE currency: the story behind the money in your pockets
F1 The Movie

Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem

Director: Joseph Kosinski

Rating: 4/5

Scoreline

Bournemouth 2

Wilson 70', Ibe 74'

Arsenal 1

Bellerin 52'

UAE currency: the story behind the money in your pockets
At a glance

- 20,000 new jobs for Emiratis over three years

- Dh300 million set aside to train 18,000 jobseekers in new skills

- Managerial jobs in government restricted to Emiratis

- Emiratis to get priority for 160 types of job in private sector

- Portion of VAT revenues will fund more graduate programmes

- 8,000 Emirati graduates to do 6-12 month replacements in public or private sector on a Dh10,000 monthly wage - 40 per cent of which will be paid by government

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Iftar programme at the Sheikh Mohammed Centre for Cultural Understanding

Established in 1998, the Sheikh Mohammed Centre for Cultural Understanding was created with a vision to teach residents about the traditions and customs of the UAE. Its motto is ‘open doors, open minds’. All year-round, visitors can sign up for a traditional Emirati breakfast, lunch or dinner meal, as well as a range of walking tours, including ones to sites such as the Jumeirah Mosque or Al Fahidi Historical Neighbourhood.

Every year during Ramadan, an iftar programme is rolled out. This allows guests to break their fast with the centre’s presenters, visit a nearby mosque and observe their guides while they pray. These events last for about two hours and are open to the public, or can be booked for a private event.

Until the end of Ramadan, the iftar events take place from 7pm until 9pm, from Saturday to Thursday. Advanced booking is required.

For more details, email openminds@cultures.ae or visit www.cultures.ae

 

Dr Amal Khalid Alias revealed a recent case of a woman with daughters, who specifically wanted a boy.

A semen analysis of the father showed abnormal sperm so the couple required IVF.

Out of 21 eggs collected, six were unused leaving 15 suitable for IVF.

A specific procedure was used, called intracytoplasmic sperm injection where a single sperm cell is inserted into the egg.

On day three of the process, 14 embryos were biopsied for gender selection.

The next day, a pre-implantation genetic report revealed four normal male embryos, three female and seven abnormal samples.

Day five of the treatment saw two male embryos transferred to the patient.

The woman recorded a positive pregnancy test two weeks later. 

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How to watch Ireland v Pakistan in UAE

When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.