Economic growth, excluding oil, stood at -1.7%, the report added.
A sectoral breakdown of growth rates in the report shows only the agriculture sector experienced a paltry growth of 0.1% while industries and services sectors contracted by 4.4% and 3.5% respectively.
Iran’s economy shrank by 6.9% in the last fiscal year (March 2019-20) stood at -0.5%, excluding the oil sector.
Only the agriculture sector experienced a growth of 2.8% last year while industries and services saw contractions of 14.7% and 0.7%, respectively.
The World Bank expects Iran's economy to bounce back to growth in 2021 with 2.1% in GDP expansion after having experienced an estimated 5.3% contraction this year.
In its June edition of Global Economic Prospects report, World Bank revised down its forecast for Iran's growth in 2020. The previous such report had estimated 0% growth in 2020.
However, the forecast for next year has been revised up, as the report forecast 1% growth in 2021.
According to World Bank, Iran experienced respective growth rates of -8.2%, -4.7% and 3.8% in 2019, 2018 and 2017.
"Iran’s GDP, which had already fallen in each of the previous two years, is expected to shrink again in 2020, by 5.3%, partly reflecting the effects of the large-scale Covid-19 outbreak on domestic consumption and the services sectors [e.g., tourism]," reads the latest report, adding that in many oil exporting states, growth will be significantly constrained by renewed policy cuts in oil production.
"US-Iran tensions have not eased appreciably even as both countries attempt to cope with the effects of the pandemic," it goes on to read.
According to Iran’s Ministry of Economic Affairs and Finance, eight main challenges face the domestic economy in the current fiscal year that started on March 20.
As reported by Fars News Agency, the most biting of these challenges is the escalation of US sanctions and depletion of Iran’s foreign exchange reserves combined with economic losses resulting from coronavirus outbreak and disruptions it has caused for businesses that would lead to leaner tax revenues.
The continuation of the decline in oil, petroleum products and petrochemical prices due to global recession is another challenge facing the Iranian economy.
Nonetheless, Saeed Leylaz, university professor and economic analyst, says the decline in oil prices won’t hurt Iran as much as it affects other oil exporting countries.
“Iran is not a consequential exporter of crude oil; we are strong on exports of gas condensates and petrochemicals rather than crude oil. The decline in oil prices would cause between $10-12 million in losses for Iran compared with between $200-250 million for Saudi Arabia, which is almost 20 times greater. Iraq will suffer losses eight to 10 times bigger than Iran as well,” he added.
Another challenged referred to by the Economy Ministry is the "deepening recession in services sector" due to the coronavirus pandemic.
The sector employs nearly half of the Iranian employed population. The services sector consists of wholesale and retail trade; restaurants and hotels; transport, storage and communications; financing, insurance, real estate and business services; as well as community, social, education, health and personal services.
Other challenges facing the economy, according to the Economy Ministry, include: Withering global demand for minerals and decrease in the prices of metals; decline in consumption due to the shrinkage of people’s purchasing power; government’s rising expenses due to the impacts of coronavirus spread; and widening budget deficit in the fiscal 2020-21.
The budget for the same fiscal year, which started on March 20, was presented to the parliament in November but fell victim to the devastating coronavirus crisis and the election of the new, conservative parliament.
Deliberations of the parliament were cut short on orders from Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei, and a slightly modified budget was submitted to the Guardians Council, which approved it on March 18.