IRAN has entered a recession due to an increase in US sanctions, causing Iranian oil production to drastically decrease and threaten the global oil market, according to the International Monetary Fund.
A new IMF World Economic Outlook report released on Monday predicts Iran’s economy will severely contract all the way through 2019.
The IMF predicts Iran’s economy will shrink by 1.5 percent in 2018 with it shrinking even further in 2019 by 3.5 percent.
Prior to May, the IMF had predicted Iran's economy would grow by four percent in both 2018 and 2019.
That changed after US President Donald Trump applied new sanctions on the Islamic Republic.
However, it is believed the recession will only last through 2019, with the country’s economy expected to see a steady growth from 2020-2023.
After Trump withdrew from the Iran nuclear deal in May 2018 after constantly criticising since it was signed in 2015.
Then, in August, Trump implemented a new round of sanctions against Iran as well as threatened any other country that wanted to do business with the country.
In November, more sanctions will be added to specifically target Iran’s oil sector.
Trump has been urging trading partners to end imports of Iranian oil as well as calling on OPEC to fill in the gap that Iran would leave.
Currently, Iran’s crude exports have plummeted by over 500,000 barrels a day.
Iranian crude exports peaked in 2016 to around 2.5million after various sanctions were lifted.
After the new sanction are implemented next month, it is expected their oil production will fall even more.
The IMF voiced great concern about this possibility in their new report.
They said: “Uncertainty remains substantial around the baseline assumptions for oil prices because Saudi Arabia’s spare capacity is shrinking and US sanctions against Iran will both weigh on Iran’s oil production prospects in the medium term and reduce Iran’s crude exports in the short term, requiring others with spare production capacity to step in.”
While Saudi Arabia and Russia have increased their own oil production due to the rising prices, Tehran warned the world that Moscow and Riyadh will be unable to make up for the loss of their contribution to the international market.