Fresh US sanctions could lead Iran into recession in 2019: Fitch

The re-imposition of US sanctions could send the Iranian economy into recession in 2019 as oil exports reduce, and rising inflation and unemployment weigh on consumption, Fitch Solutions said in a report on Thursday.

While US sanctions on Iranian oil imports will come into force in early November, the trend is already playing out even before the activation date, the report said, adding “Tanker tracking data suggest a sharp drop-off in Iranian oil exports over August-September.”

The report forecasts Iran oil exports to decline from a peak of 2.5 mbd in April 2018 to around 1.2 mbd in 2019.

Already-low foreign investment inflows will also reduce further, as companies with US exposure exit Iranian projects, the report maintained.

Also, declining foreign exchange inflows and rising money supply growth will fuel depreciation of the rial - which has already suffered severe losses in the ‘free market’ year-to-date (YTD)- and will send inflation higher, Fitch Solutions maintained.

“Coupled with very limited credit availability, this will constrain private domestic investment and consumption,” it added.

“Although we expect public spending on subsidized imports of basic goods and certain welfare schemes to continue, limiting pressures on the population to some extent, we do not expect Iranian authorities to be able to accelerate job creation amid the current economic headwinds. As such, unemployment is likely to rise, further contributing to the weakening trend in private consumption,” the report added.