The World Bank is Not Optimistic About Iran's Economic Outlook

The World Bank, in its important report titled "Global Economic Prospects" published on Tuesday, January 13, 2015, has provided data regarding Iran as well. Before addressing the situation in Iran, let's first look at the global economic outlook from the perspective of this report in an interview with Fereydoun Khavand. Fereydoun Khavand summarizes the World Bank report with three important data points: in the current year, 2015, the average economic growth for the entire world economy is 3 percent, for developing economies it is 4.8 percent, and for advanced economies, it is 2.2 percent. The World Bank states that after last year's disappointing growth rate, developing countries will see a slight improvement in their economic situation this year, thanks to falling oil prices, economic recovery in the United States, and low-interest rates globally, with this trend expected to continue into 2016 and 2017. The growth forecast in the World Bank's report shows significant differences among advanced countries, with the U.S. and the U.K. expected to have relatively good growth rates alongside decreasing unemployment, while the Eurozone and Japan will continue to struggle with recession. Economic growth in China is also expected to decline slightly this year and in the next two years. Overall, from the World Bank's perspective, the global economy faces significant fragilities, and countries that can adapt their economies to rapid global changes through necessary reforms will fare better. Now, let's turn to Iran. How does the World Bank view Iran's economic outlook? Iran's economy faces two major problems emphasized in several pages of the World Bank report: one is the international sanctions, which continue to pose a significant barrier to the country's development, and the second is Iran's dependency on oil, especially as oil prices are plummeting. The report indicates that Iran needs oil prices above $130 per barrel to balance its budget, while current prices fluctuate around $45 per barrel. Given these issues, the World Bank forecasts Iran's growth rate at below 1 percent (0.9 percent) for 2015, 1 percent for 2016, and 2.2 percent for 2017. Overall, the World Bank places Iran's economic growth rate significantly lower than the global average, that of developing countries, and that of the Middle East. Thus, it appears that the World Bank is more pessimistic than President Hassan Rouhani's government regarding Iran's economic future, as the Rouhani administration anticipates a growth rate of 3 percent for the current solar year and higher for 1394. Of course, the World Bank bases its calculations on current data. However, if the issue of sanctions is resolved, the situation would naturally change. It would not be an exaggeration to say that sanctions impact Iran's economy even more than the oil market.