IMF forecasts for Iran show limited sanction hit

DUBAI, Oct 9 (Reuters) - Iran will manage to bring its highinflation lower and return to growth next year despite Westernsanctions over its nuclear programme, according to projectionsfrom the International Monetary Fund.

The IMF forecasts, which also include a small trade surplusthis year and next, suggest that although the sanctions aredamaging Iran by cutting its oil exports, they are not likely tocause a collapse of its economy.

However, much of the IMF analysis is based on statisticsprovided by the Iranian government, which private economists saymay not be reliable, and most of the report was prepared beforeIran's currency, the rial, plunged by about a third against thedollar in 10 days through Oct. 2.

In its semi-annual World Economic Outlook, the IMF forecastIran's gross domestic product would shrink 0.9 percent this yearafter 2 percent growth in 2011.

Its prediction for this year was a downgrade from a forecastof 0.4 percent growth in its last report in April, but the IMFprojected GDP would expand next year by 0.8 percent.

The IMF expects inflation to moderate to 21.8 percent in2013 from 25.2 percent in 2012; many private economists,however, think inflation is well over 30 percent.

It predicted unemployment would hit 14.1 percent this yearand 15.6 percent next, up from 12.3 percent in 2011.

Iran's current account, its balance of trade in goods andservices, is expected to enjoy a surplus of 3.4 percent of GDPthis year and 1.3 percent next year, the IMF said.

That would be a big drop from a surplus of 12.5 percent in2011, but the forecast still suggests it may not face acrippling balance of payments crisis due to the sanctions.

The forecasts assume an average global oil price of $106.18a barrel in 2012 and $105.10 in 2013, the IMF said, but it didnot detail many other assumptions behind its predictions,including the extent to which the sanctions would cut Iran's oilexports. The sanctions' impact has increased in the last severalmonths, according to Western government officials.

As an international body, the IMF often faces a delicatebalance in maintaining good relations with the countries itmonitors while pressing them to provide accurate data and adopteconomic policies it favours.

In July 2011, before Western sanctions were tightened, theIMF issued a report praising the Iranian government's decisionto slash energy and food subsidies, calling the policy "a uniqueopportunity for Iran to reform its economy and accelerateeconomic growth and development".

Some private economists called the report over-optimistic,saying it underestimated the risk of the subsidy cuts causingrunaway inflation and damaging consumer spending power.

For an analysis of the rial's fall, click

(Reporting by Andrew Torchia; Editing by Will Waterman)

((andrew.torchia@thomsonreuters.com)(+9715 6681 7277)(ReutersMessaging: andrew.torchia.thomsonreuters.com@reuters.net))