Iran's economic contraction to increase due to resurgence of COVID-19 cases - World Bank

Business Materials 6 January 2021 19:19 (UTC +04:00)
Iran's economic contraction to increase due to resurgence of COVID-19 cases - World Bank

BAKU, Azerbaijan, Jan. 6


A World Bank Group announced that as COVID-19 cases surged in Iran, stricter measures were enforced in Fall 2020 and new social transfers were announced.

The Iran Economic Monitor (IEM) provides an update on key economic developments and policies. It examines these economic developments and policies in a longer-term and global context and assesses their implications for the outlook for the country, Trend reports citing World Bank Official Website.

“In November 2020, stricter health containment measures were introduced after Iran registered over 1 million COVID-19 cases and the death toll climbed above 49,000 deaths,” IME said in the report”

According to the report, the economic shock of the COVID-19 pandemic pushed more households into poverty. In response, the authorities unveiled new rounds of cash transfers and consumption loans for lower-income deciles and households without a permanent source of income.

“Iran’s economic outlook remains highly uncertain, especially given the COVID-19 evolution and the continuation of US sanctions,” said IME.

“Iran’s GDP in 2020/21 is estimated to contract by 3.7 percent due to a dual contraction of the non-oil and oil sectors,” the World Bank Group said in the report adding that “The projected contraction remains moderate compared to other countries due to a shorter initial period of domestic containment measures and neighbor countries move to more growth-focused mitigation strategies.”

IME noted that it also reflects the fact that the economy was already operating well below capacity prior to the pandemic. Oil production is projected to remain close to the first-quarter level of 2 mbpd.

“Overall economic contraction is projected to increase in the second half of 2020/21 (Oct 2020–Mar 2021) as stricter health measures are enforced due to a resurgence of cases in the colder season,” IME said.

The IME predicted that in the absence of a vaccine widely adopted in the country until end-2021, recovery in 2021–2022 is projected to be weak and be primarily driven by the non-oil sector. Fiscal pressures are forecast to increase due to lower revenue growth and higher financing costs.

The World Bank Group reported that the economic outlook is subject to significant risks if large resurgences of the COVID-19 outbreak force stringent lockdown measures or a reliable vaccine is not widely distributed in 2021.