Dubai (Reuters) – Hit by sanctions curbing oil sales, Iran’s economy is set to fall deeper into recession this fiscal year and foreign reserves could drop to $73 billion by March, a loss of almost $40 billion in two years, the Institute of International Finance said.
The economy shrank by 4.6% in the 2018-2019 fiscal year and the contraction is expected to deepen to 7.2% in the current fiscal year, the IIF, a finance industry body, said this week.
The United States last week sanctioned 17 Iranian metal producers and mining companies in response to Iran’s attack on U.S. troops in Iraq, which was retaliation for the U.S. killing of an Iranian general in a drone strike in Baghdad.
Iran is not a major metals producer but the sanctions add pressure on the economy, crippled by a decline in volume of exports of crude oil and condensates, which fell from a peak of 2.8 million barrels per day in May 2018 to less than 0.4 million barrels a day in recent months.
“The fall in imports has only partly offset the drastic decline in exports. As a result, the current account balance has shifted to a small deficit for the first time since 1998,” the IIF said.
Iran saw its oil revenues surge after a 2015 nuclear pact between Tehran and world powers ended a sanctions regime imposed three years earlier over its disputed nuclear programme.
But new sanctions brought in after U.S. President Donald Trump withdrew from that deal in 2018 are the most painful imposed by Washington.