Prospects for the Iraqi Economy: Challenges and Opportunities to 2025 and Beyond
The International Monetary Fund (IMF) provided a detailed assessment of the Iraqi economy, pointing to the challenges and opportunities that lie ahead for Iraq. According to the Fund, the Iraqi economy contracted by 2.2% in 2022, but the forecasts for 2024 and 2025 are more optimistic. The Fund expects the economy to grow by 1.4% in 2024 and 5.3% in 2025. However, the Fund warns that Iraq’s financial situation remains worrisome, with the budget deficit expected to widen to 7.6% of GDP in 2024, compared to 1.3% in 2023. It also expects government debt to reach 48.2% of GDP in 2024 and 54.6% in 2025.
Domestic Stability and Recovery
Despite these fiscal concerns, Iraq has seen significant improvements in domestic stability. The IMF notes that domestic stability has improved since the new government took office in October 2022, creating an environment conducive to economic reforms. This stability was a key factor in the approval of Iraq’s first three-year budget, which, despite its fiscal expansion, has helped drive a strong recovery in the non-oil economy.
In addition, Iraq has been largely immune to regional conflicts, especially the ongoing conflicts between Israel and the Gaza Strip. This relative stability, combined with the recovery of the non-oil economy, has allowed Iraq to focus on internal economic adjustments.
Inflation and Fiscal Imbalance
One of the positive aspects of Iraq’s recent economic performance is the decline in domestic inflation, which fell to 4% by the end of 2023. This improvement is attributed to lower global food prices, the currency revaluation in February 2023, and the return of trade finance to normal.
However, the IMF warns that Iraq’s fiscal expansion, coupled with lower oil prices, could exacerbate economic imbalances. While the expected fiscal expansion in 2024 is expected to stimulate growth, it could lead to a further deterioration in fiscal and external accounts. Iraq remains vulnerable to oil price volatility, which accounts for a significant portion of its revenues.
Without urgent policy adjustment, the Fund warns that Iraq could face medium-term sovereign debt stress and external stability risks. These concerns are heightened by global uncertainties, such as the possibility of a sharp decline in oil prices or an escalation of conflict in the Middle East.
Fiscal and structural reforms
to stabilize the economy and reduce financial vulnerability The IMF stresses the need for significant fiscal adjustments. Iraq needs gradual but impactful fiscal policy reforms to stabilize debt over the medium term and rebuild financial buffers. The Fund recommends focusing on controlling the public wage bill, gradually eliminating mandatory employment policies, and enhancing non-oil revenue mobilization. In addition, better-targeted social support programs can help alleviate poverty and strengthen public finances.
The Fund also stresses the importance of implementing key structural reforms to support long-term economic development. Iraq’s priorities include strengthening the tax and revenue system, and implementing the “single treasury account” and reducing the use of extra-budgetary funds are critical steps in achieving effective fiscal consolidation. Other reforms include reducing cash financing, reforming the pension system, improving governance, and combating corruption.
Strengthening the financial sector
The Central Bank of Iraq has made efforts to improve monetary policy and strengthen liquidity management, and the IMF has commended these efforts. However, the Fund highlights the need for better coordination between fiscal and monetary operations to manage excess liquidity and improve the effectiveness of monetary policy.
Furthermore, the Fund sees restructuring large state-owned banks as essential to improving the efficiency of the financial sector. The Fund urges continued modernization of the private banking sector by facilitating correspondent banking relationships, reducing regulatory uncertainty, and increasing competition among private banks.
Unleashing the potential of the private sector
The future of the Iraqi economy depends largely on transforming its still underdeveloped private sector. The IMF recommends structural reforms to unleash the potential of the private sector, with a focus on creating equal opportunities between public and private sector jobs, increasing women’s participation in the labor market, and reforming education and labor laws to meet the needs of the modern economy.
In addition, Iraq needs to improve its governance systems, address efficiencies in public procurement, and address challenges in critical sectors such as electricity. These reforms are essential to creating a more sustainable and diversified economy. The Fund also noted Iraq’s renewed efforts to join the World Trade Organization (WTO), a move that could help Iraq integrate into the global economy and attract foreign investment.
Outlook 2025 and Beyond
By 2025, the Iraqi economy is expected to begin a significant recovery, with strong growth in its non-oil sector and increased investment in areas such as technology and infrastructure. If the required fiscal and structural reforms are implemented, Iraq may be able to reduce its dependence on oil and strengthen its private sector.
However, the Iraqi economy will remain vulnerable to global economic fluctuations, particularly with regard to oil prices. If oil prices continue to decline or if regional crises increase, Iraq may face challenges in sustaining its economic growth. In this context, it is essential for the Iraqi government to continue implementing reforms that enhance economic diversification, while emphasizing the building of strong financial reserves to protect the economy against future shocks.
Conclusion
The IMF’s assessment of Iraq’s economic outlook presents a mixed picture: while there are signs of recovery and positive growth projections for 2024 and 2025, significant challenges remain. The Iraqi economy remains highly dependent on oil revenues, making it vulnerable to price fluctuations. The Fund emphasizes the need for fiscal discipline, structural reforms, and a comprehensive plan to diversify the economy. If these challenges are addressed, Iraq has significant potential to lay the foundations for a more stable and prosperous economy in the coming years, especially after 2025.
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Iraq Is the Second Arab Country In Terms Of Natural Resources
Iraq ranked ninth in the world and second in the Arab world as the country with the most natural resources. Russia is the world’s largest natural resource holder, led by its large reserves of oil, coal, natural gas and rare earth minerals.
The United States follows, thanks to its coal, timber, gas and mineral resources, while Saudi Arabia and Canada rank third and fourth, respectively, driven by oil and important industrial minerals.
Countries such as Iran, Iraq and Venezuela stand out on the list, which have huge amounts of oil, natural gas and other energy resources, while other countries such as Australia, China and Canada have important earth minerals used in industry.
Despite the huge resources these countries possess, wealth management remains a crucial factor in achieving sustainability and real development in the future.
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Central Bank Governor: Opening External Channels With Foreign Currencies Eliminates The Black Market
Central Bank Governor Ali Al-Alaq confirmed on Thursday that opening channels in foreign and Arab currencies achieves stability in the exchange rate and gradually eliminates the black market.
The media advisor of the Trade Bank of Iraq (TBI), Aqeel Al-Shuwaili, said in a statement, which was reviewed by “Al-Eqtisad News”, that “the governor of the Central Bank visited the Trade Bank of Iraq and appreciated the bank’s efforts to expand its customer base of importing merchants and the procedures to facilitate their transactions in a way that contributes to achieving stability in the exchange market.”
According to the statement, the governor of the Central Bank stressed “the need to make efforts to achieve fluidity and provide the best banking services to the bank’s customers.”
The governor pointed out that “the Central Bank’s continued opening of multiple external channels in foreign and Arab currencies achieves continuous stability in the exchange rate and gradually eliminates the black market.”
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The Securities Commission Warns Against Dealing With Fictitious Companies Claiming To Provide Stock Trading Services
Chairman of the Securities Commission Faisal Al-Haimas Stock Exchange Economy News – Baghdad The Securities Commission warned citizens, on Thursday, against dealing with fictitious companies that claim to provide online stock trading services.
A statement by the Authority, seen by Al-Eqtisad News, quoted its Chairman, Faisal Al-Haims, as saying, “These misleading companies that publish their advertisements on social media sites aim to exploit and deceive citizens.”
Al-Haimas called on “citizens to invest in the Iraqi Stock Exchange, where there is a safe investment environment and companies licensed by the Commission, subject to strict controls and laws set to protect investors and guarantee their rights.”
He added, “The Iraq Stock Exchange includes reliable companies operating in various sectors, and provides promising investment opportunities. We invite everyone to visit the official website of the Securities Commission to verify the companies authorized to trade.”
The Authority indicated that it “continues to monitor the market and take the necessary measures against illegal entities,” stressing “the importance of being accurate and avoiding dealing with suspicious entities.”
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Globally.. Gold Prices Decline
Gold prices witnessed a decline during early trading on Thursday, as investors took profits after prices recorded their highest level in more than a month earlier in the day amid growing expectations that the Federal Reserve (the US central bank) will cut interest rates next week.
Spot gold fell 0.5 percent to $2,704.41 per ounce by 0257 GMT, after hitting its highest since Nov. 6 earlier in the session.
US gold futures also fell 0.5 percent to $2,744.60.
According to the CME FedWatch tool, traders now expect a 98.4 percent chance of the Fed cutting rates by 25 basis points on Dec. 18, compared with about 86 percent before the U.S. inflation report.
Among other precious metals, spot silver fell 0.3 percent to $31.84 an ounce, platinum fell 0.2 percent to $937.55 and palladium fell 0.2 percent to $979.91.
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Dollar Prices Stabilize In Baghdad Markets
The US dollar exchange rate stabilized this morning, Thursday, in Baghdad markets.
The prices are as follows. The selling price is 151,500 dinars, while the purchase price is 149,500 dinars per 100 dollars.
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Al-Alaq Praises TBI’s Efforts In Expanding Customer Base
The Governor of the Central Bank, Ali Al-Alaq, praised, on Thursday, the efforts of the Trade Bank of Iraq (TBI) in expanding its customer base, stressing that the Central Bank’s continued opening of channels in foreign and Arab currencies achieves continuous stability in the exchange rate.
The media advisor to the Trade Bank of Iraq (TBI), Aqil Al-Shuwaili, said in a statement, “The Governor of the Central Bank visited the Trade Bank of Iraq and appreciated the bank’s efforts in expanding its customer base of importing traders and procedures to facilitate their transactions in a way that contributes to achieving stability in the exchange market. “
The Governor of the Central Bank stressed the need to make efforts to achieve fluidity and provide the best banking services to the bank’s customers.
The Governor pointed out that “the Central Bank’s continued opening of multiple external channels in foreign and Arab currencies achieves continuous stability in the exchange rate and gradually eliminates the black market.”
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Hassan Ali Abd: Developing The Financial Sector Is The Key To Development
Banking expert Hassan Ali Abd stressed the importance of government trends aimed at
advancing the reality of electronic payment and its role in attracting foreign investment flows, and
adopting the use of advanced technological means of communication and information.
Abdel stressed the importance of supporting the next stage aimed at developing the performance of the economic sectors in order to achieve a multiplicity of financial revenues for the country, and
working to prepare in-depth studies on the available capabilities in non-oil activities and
trying to develop them so that they can create alternatives, in addition to the necessity of
preparing a long-term strategy that takes into account various aspects.. He explained that the
process as a whole requires an advanced banking system capable of supporting all economic operations, and
our private banks have become aware of this and are working hard to develop all aspects of their work. He pointed out that Iraq is an important economic front for many international companies during the coming period, and we must work in this direction and create an appropriate environment to attract international efforts.
