TEHRAN - Iranian economy is projected to grow by 3.7 percent in 2022 while the average global economic growth is seen at 2.9 percent in the said year, according to the World Bank’s Global Economic Prospects (GEP) report released on Tuesday.

“Output in the Islamic Republic of Iran is expected to grow by 3.7 percent in 2022, boosted by the waning of the pandemic and higher oil prices,” the bank said in the report.

The World Bank slashed its global growth forecast and warned that many countries could fall into recession as the economy slips into a period of stagflation reminiscent of the 1970s.

Global economic expansion is expected to drop to 2.9 percent this year from 5.7 percent in 2021 and 1.2 percentage points lower than the 4.1 percent predicted in January, the Washington-based bank said in the GEP report.

Back in April, in a report on Iran’s economy, the bank had revised up its forecast for Iran's gross domestic product (GDP) growth in 2022, expecting the country’s economy to grow 3.7 percent this year.

The entity had previously estimated the Islamic Republic’s GDP growth at 2.4 percent for 2022, in the GEP report released in January.

“Iran’s economy continues its gradual recovery that started in mid-2020, driven by the oil sector and services. However, water and energy shortages led to a contraction of the agriculture and industry sectors,” the recent report said.

A recovery in Iran’s oil and service sectors (11.7 and 6.5 percent growth, respectively) – following a return of global and domestic activity after the start of the pandemic – led to a five percent year on year growth in late 2021-early 2022, the bank said.

However, the agriculture sector contracted by 2.1 percent due to drought and energy blackouts. On the demand side, a 3.4 percent expansion in consumption drove GDP growth as activity returned closer to pre-pandemic levels. Imports growth (25.5 percent) outweighed the pick-up in exports (5.4 percent), and investment also declined (5.2 percent).

The economic rebound has yet to be reflected in the labor market as the recovery was largely driven by the oil sector, and employment growth in services and industries could not compensate for job losses in the agriculture sector, the report stated.

The bank puts Iran's economic growth at 4.1 percent in 2021 and about 3.4 percent in 2020.

World Bank which had estimated Iran's inflation rate at 40.1 percent for 2021 believes that it would fall to 37.6 percent this year and 34.8 percent next year.

“Higher projected oil prices in the outlook period and growth in oil export volumes considering the tighter global oil market are forecast to curb fiscal pressures. However, high expenditure growth due to increasing wage bills and pension spending is projected to keep the fiscal balance in a deficit of 3.8 percent of GDP in 2022-24.” the bank said in its report.

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