US Sanctions on Iran Dragging Economic Growth in Mideast: IMF

The IMF warned in a bi-annual economic outlook report that prospects for the region are "clouded by elevated levels of uncertainty."

"Such uncertainty may increase investors' perception of risk for the whole region, leading to capital outflows and exchange rate pressure," the global lender said, according to AFP.

The IMF forecasts the economy in Iran, the second largest in the region behind Saudi Arabia, will shrink by 6.0 percent this year after contracting by 3.9 percent in 2018.

Jihad Azour, IMF Middle East and Central Asia director, said the dire projection was made before the US tightened up measures targeting Iran's oil industry last week.

Azour said that sanctions have already pushed inflation in Iran to around 50 percent.

Overall regional economic growth was expected to remain subdued at 1.3 percent this year from 1.4 percent in 2018.

For oil exporters growth was down at 0.4 percent for 2019, while importing countries were expected to increase at 3.6 percent this year, from 4.2 percent in 2018.

(Persian) Gulf Cooperation Council ((P)GCC) countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - were forecast to slightly buck the trend, improving to 2.1 percent growth from 2.0 in 2018.

"For oil exporters, they are important to be less dependent on the volatility of oil price and for diversifying their economies," Azour said.

He said reforms are also vital for oil importers to face a rising level of debt which has reached over 80 percent of GDP on average.

The region, in addition to Pakistan and Afghanistan, needs to create some 25 million jobs over the next five years to maintain current unemployment rates, he said.

For the PGCC countries that figure stands at 5 million.