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An Iraqi peddler holds in his hand banknotes of Iranian rials for exchange in the Iraqi capital Baghdad. Photo credit Ahmad Al-Rubaye/AFP/Getty Images

Iran's economy has been in free-fall since President Trump withdrew the U.S. from the Iran nuclear deal and reimposed strict sanctions on its government. And the administration's unprecedented move on Monday designating the Islamic Revolutionary Guard Corps (IRGC) as a foreign terrorist organization is expected to further damage its economy.

The impact: The International Monetary Fund forecast an even deeper recession for Iran in its World Economic Outlook, released Tuesday. The IMF said it now expects Iran's economy to contract by 6% this year, compared to October's prediction of a 3.6% drop.

  • The World Bank predicted in an April report that the Iranian economy would "contract sharply," and it expects GDP to shrink by 3.8% in 2019 on the back of U.S. sanctions.
  • Dozens of European businesses have pulled out of Iran in the wake of the U.S. escalating its pressure campaign. "If you're the general counsel of an Asian bank or a European bank, your world changed when that designation came out yesterday,” Sec. of State Mike Pompeo said of the IRGC move. (Trump's ambassador to Germany, Ric Grenell, has been especially aggressive in pushing European companies to cut ties with Iran.)
  • Iran's currency, the rial, lost more than 60% of its value compared to the U.S. dollar last year, and inflation surged fourfold to an estimated rate of more than 40% by the end of 2018. (In 2019, the Central Bank of Iran has stopped publishing inflation data, leading some analysts to believe that the rate has kept rising beyond 40%.)

The big picture: "Our sanctions have denied the regime many billions in revenue that it would otherwise spend on terrorism, missile proliferation, and proxies," said Brian Hook, who helms Iran policy at the State Department. "The positive effects are increasingly visible. We will continue to use all the tools at our disposal to press the regime to change its destructive policies."

Yes, but: Iran's leaders have shown no signs, so far, that they're willing to concede an inch to the Americans. Most analysts we've spoken to believe the regime can endure even greater stress than they've suffered to date, noting it outlasted long bouts of dire economic conditions since the early 1980s.

  • "While maximum pressure can cause maximum damage, Tehran's strategy has been to exercise maximum patience," said Behnam Ben Taleblu, a senior fellow at the Foundation for Defense of Democracies. "Iran is in dire straits, but they may not mind suffering a little longer if they think their suffering could soon be vindicated."
  • "This kind of recession developing countries can handle," said Djavad Salehi-Isfahani of the Brookings Institution. "In terms of economic collapse, that is not on the horizon. But increased poverty, lower income, higher unemployment? Yes, those things are probably going to happen in the next 12 months. ... My prediction is they will try to weather it."

What's next: The administration faces a major decision next month. After withdrawing from the nuclear deal, the Trump administration let eight countries keep buying Iranian oil without facing U.S. sanctions. On May 2, the administration will have to decide whether to keep those waivers in place.

Go deeper

39 mins ago - Health

CDC panel endorses Pfizer vaccine for 12- to 15-year-olds

Illustration: Brendan Lynch/Axios

An advisory panel for the Centers for Disease Control and Prevention on Wednesday endorsed the Pfizer-BioNTech coronavirus vaccine for 12-to 15-year-olds, following the FDA's emergency use authorization.

Why it matters: Approval from the CDC panel was the final step needed before inoculations could be offered at any vaccination site for this age group.

  • Pfizer has said its vaccine is 100% effective at protecting against COVID-19 in a trial of more than 2,200 children between the ages of 12 and 15.

GOP lawmakers downplay Capitol riot at House hearing

Photo: Jon Cherry via Getty Images

Republican members of Congress sought to minimize the Capitol insurrection at a House hearing on Wednesday, with statements calling pro-Trump rioters "patriots" and other lawmakers falsely denying demonstrators were supporters of the former president at all.

Driving the news: The hearing comes shortly after House Republicans voted to oust Rep. Liz Cheney (R-Wyo.) from leadership over her criticism of former President Trump's actions leading up to and on Jan. 6.

McConnell, McCarthy say 2017 tax law is "red line" in infrastructure talks

The top Republicans in the House and Senate told reporters after meeting with President Biden at the White House that "there is a bipartisan desire to get an outcome" on an infrastructure package, but stressed that revisiting the 2017 tax cuts is a "red line."

Why it matters: Wednesday marked the first time that Biden has hosted Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader Kevin McCarthy (R-Calif.) at the White House.

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