Exclusive: Iran’s inflation may reach to 29%, World Bank

World Bank in its report “global economic prospects” predicted -5.3% growth for Iran this year but it said the growth for the next year will be reach to 2.1 percent which means an end to 3 consecutive years of contraction.

The GDP projection is based on a baseline of a benign impact of COVID-19 on the Iranian economy. According to World Bank’s reply to ISNA, with oil production already at the lowest levels in decades, the majority of the economic contraction in 2020/21 is expected to be due to a decline in non-oil sector activity. The services sector (largest component of GDP) is expected to be broadly impacted, with sales (retail and whole) and transportation sectors disproportionately so. Agriculture output is expected to only be impacted moderately as demand for essential goods remain in place. On the industry side, manufacturing and construction are projected to be hardest hit due to simultaneous supply chain and demand shocks. The 2020/21 GDP growth projection differs from 2019/20 in which the majority of the decline in GDP was associated with a large contraction of oil GDP, itself driven by US sanctions.

Asked about the trend of inflation in the next months, World Bank said: “The reported recent downward trend in inflation is based on official data published by the Government of Iran. Our projections for inflation through 2020/21 see an increasing trend in inflationary pressures due to COVID-19 and exchange rate dynamics.it added: We currently project average inflation for 2020/21 to reach 29 percent (up from the SCI reported 21 percent year-on-year in May). The inflation projection hinges on the assumption that the projected fiscal deficit will be mainly financed through continued sales of government assets and bond issuance while at the same time CBI measures on controlling liquidity growth continue”.

“Given the uncertainty of the global economic context and Iran’s economy, the outlook is subject to downside risks and revisions as more information become available” added World Bank in its reply.

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