How incompetence, sanctions jointly hit Iran’s economy

Al-Monitor | : There is an Iranian proverb that goes, “You can tell a good year from its spring.” Judging from the massive damage caused by the recent floods in Iran, one has to conclude that the new Iranian year (beginning March 21) will be a bad one for the economy. The economic consequence of the recent floods will include a minimum of $2.5 billion in direct damages and even more in indirect losses.

Even before the impacts could be measured, on April 9, the International Monetary Fund revised the growth forecast for Iran downward as part of the overall projections for the global economy in 2019. In the case of Iran, the previous forecast of 3.6% was revised with a projected 6% decline in the current year. The announcement by the Donald Trump administration that it won’t extend sanctions waivers for several countries that buy Iranian oil will make it more difficult for Iran to generate and repatriate its oil export revenues.

Iran, already troubled by economic decline coupled with high inflation — stagflation — has just commenced a year in which unfavorable economic developments will undermine welfare, employment and purchasing power. The projected performance, which will potentially be undermined by the recent floods, will be the worst by Iran’s economy since it contracted by 7.7% in 2012. The main contributor to the economic decline that year was the same as in 2019: the negative psychological and practical impacts of external sanctions, especially the deprivation of segments of the country’s oil and gas export revenues. However, it would be a mistake to explain the current picture with sanctions alone.

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