Wires

Iran's economy to shrink by 8.7% in 2019/20 - World Bank

DUBAI, Oct 10 (Reuters) - Hit by wide-ranging U.S. sanctions, Iran's economy is expected to contract by 8.7% in the financial year 2019/20 mainly due to constraints on its oil and gas industry, the World Bank said.

Washington's policy of applying "maximum pressure" on Iran through sanctions has shredded the country's oil revenues, sent its economy into recession and devalued its national currency.

"The expected deterioration in economic growth would mean that by the end of 2019/20 the economy would be 90% of its previous size compared to just two years earlier," the World Bank said in a regional economic report.

Iran's financial year starts in March.

An Iranian central bank spokesman responded to the report saying that "because of the economic war staged by America against Iran there is economic pressure but we are on the right track and economy is going well and will get better with the solutions we are working on."

Iran's Finance Ministry was not available to comment.

Iran's oil revenues had surged after a 2015 nuclear pact agreed with six major powers that ended a sanctions regime imposed three years earlier over its disputed nuclear program.

But new sanctions brought in after President Donald Trump withdrew from that deal in 2018 are the most painful imposed by Washington, targeting nearly all sectors of Iran's economy.

Annual inflation climbed to 52% in May due to economic uncertainty and a depreciation in Irans rial currency in the preceding 12 months, the World Bank said, adding that inflation had since eased and was expected to fall to 38%.

The bank forecast inflation would stay above 20% for the next two years, while the currency depreciation could, in coming years, "allow the country's goods and services to become more competitive regionally and help close the expected current account deficit gradually."

The bank expected Iran's fiscal deficit, which stood at 5.4% in 2018/19, to widen in the next few years, rising to 6% in 2021/22, as the government increases spending on social protection measures while receiving lower oil income.

(Reporting by Davide Barbuscia and Parisa Hafezi)