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Iranian economy favorable despite sanctions: World Bank

Source: Tehran Times

The Iranian economy is set to grow favorably in 2012 despite effects of new sanctions, says the World Bank's latest Global Economic Prospects (GEP) 2012.

Despite the introduction of international sanctions and ripple effects from the global financial crisis, rising oil prices and a good crop helped to support the economy, the Washington-based financial body said.

With a reference to the subsidy reform plan which went into effect in Iran in December 2010, the World Bank said, "A revision to the system of subsidies and cash transfers to better balance reimbursements and fiscal accounts has been looked upon favorably by outside analysts. Iran has made important efforts to reform its income support system away from subsidies and toward better targeted social safety nets, and this has brought down the pace of prices."

U.S. President Barack Obama signed into law a defense funding bill that imposes sanctions on financial institutions dealing with the Central Bank of Iran on December 31, 2011 with the aim of hampering Iran's crude oil exports.

The European Union has also reached a preliminary agreement to introduce an oil embargo against Iran.

Iran has threatened it may close the strategic Strait of Hormuz, which accounts for about 30 percent of world's sea-borne oil shipments, if its interests are seriously threatened.

The World Bank warned that additional risks to the outlook of global oil market include the possibility that geopolitical and domestic political tensions could disrupt oil supply.

"In the Middle-East and North Africa, although political turmoil has eased, there remains the possibility that oil supply from one or more countries could be disrupted, while mounting tensions between Iran and high-income countries could yield a sharp uptick in prices, because of disruption to supply routes, or because of sanctions imposed by high-income countries that shift demand away from Iran toward other producers," the report added.

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