Iran’s return to the world market is expected to add 1 million barrels of oil a day to production, the World Bank said in its report Monday. While the increase will drag oil prices to new lows from the current $49 a barrel, it will also help Iran’s economy grow. The World Bank expects Iran’s economic growth to accelerate to 5 percent in 2016, from 3 percent this year.
“Just as the tightening of sanctions in 2012 led to a sharp decline in Iran’s oil exports and two years of negative growth, we expect the removal of sanctions to boost exports and revive the economy,” said Shanta Devarajan, World Bank chief economist for the Middle East and North Africa (MENA) region.
The World Bank projects a decrease of export earnings and revenue for MENA’s other oil exporters, the Gulf States and Libya. Crude importers in the region, Egypt and Tunisia, are expected to benefit from lower oil prices.
Exports from Iran are expected to increase by about $17 billion next year, or 3.5 percent of GDP. Foreign investment may scale up to $3 billion a year.
World Bank MENA economist Lili Mottaghi says that the interest from multinational companies in investing in Iran has increased since the framework agreement of April 2015. She adds that the trend will continue after the sanctions are removed, supporting much-needed capital for the modernization of Iran’s oil sector.
Sanctions imposed on Iran will be lifted in exchange for Tehran curbing its nuclear program. The long-awaited deal was signed in Vienna by Iran and six major world powers on July 14 after long negotiations. The agreement sealed by world powers last month will be debated in the US Congress in September.