Iran’s economy to shrink on tighter sanctions, World Bank says

Iran's economy will shrink 1 percent this year as the international trade embargo tightens, the World Bank said, Bloomberg reported.

"Product boycotts and financial sanctions are expected to exact a toll on growth over 2012 and 2013," the bank said in a report published today. It predicted a contraction of 0.7 percent next year. The Washington-based bank had predicted in January that Iran's $480 billion economy would grow 2.7 percent and 2.9 percent this year and next.

Iran, the second-largest oil producer in the Organization of Petroleum Exporting Countries, is under a series of trade and financial sanctions imposed by the United Nations and the U.S. over its nuclear program. A European Union embargo on purchases of Iranian crude is also set to come into force on July 1.

The World Bank cut its economic growth forecast for the Middle East and North Africa to 0.6 percent from 2.3 percent. It said the economy of Syria, where violence is escalating as protesters confront security forces, may shrink 6.4 percent.

Foreign direct investment to developing nations in the Middle East fell to $8.6 billion last year from $22.7 billion in 2010, the World Bank said, as popular uprisings spread from Tunisia and Egypt across the region. The bank cut its forecast for growth in Egypt this year to 1.4 percent from 3.8 percent in January.