Economic and Political Overview

flag Iraq Iraq: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

Economic Indicators

Iraq's gradually rebounding economy was severely hit by Covid-19, weighing on domestic demand and macroeconomic balances, as well as lower global oil prices and OPEC output quotas. GDP contracted to an estimated 15.7% in 2020 - by far the lowest performance since 2003 - but grew back to 7.7% in 2021 and 7% in 2022, a recovery to pre-pandemic levels. Buoyed by rises in public expenditure and robust agricultural output, real non-oil GDP is projected to have expanded by 6% in 2023 following a stagnant performance in 2022 (IMF). However, the overall GDP growth rate was negative by an estimated 2.7%. The momentum of non-oil growth is expected to persist into 2024, but substantial declines in oil prices or prolonged OPEC+ cuts could exert pressure on fiscal and external accounts. Looking ahead, over the medium term, non-oil growth is forecasted to stabilize around 2.5% due to prevailing obstacles to private sector development. The IMF projects overall growth at 2.9% this year and 4% in 2025.

Concerning public finances, although the expansionary budget was under-executed due to delayed Parliamentary approval, the fiscal balance still declined from a surplus of 10.8% of GDP in 2022 to a deficit of 1.3% in 2023, due to lower oil revenues and an increase in expenditures by 8 percentage points of GDP, of which salaries and pensions contributed 5 percentage points as the authorities started hiring in line with the budget law. Absent new policy measures, the fiscal deficit is expected to reach 7.6% in 2024 and widen further thereafter as oil prices are projected to gradually decline over the medium term. As a consequence, public debt would almost double from 44% in 2023 to 86% by 2029 (IMF). Achieving an ambitious fiscal adjustment is imperative to stabilize debt in the medium term and to rebuild fiscal buffers, all while safeguarding essential capital spending. Additionally, the authorities should focus on enhancing public financial management and mitigating fiscal risks. Headline inflation dropped from a peak of 7.5% in January 2023 to 4% by the end of the year, driven by reduced international food and energy prices, alongside the effects of the February 2023 currency revaluation. The current account is anticipated to have registered a surplus of 2.6% of GDP, with international reserves climbing to USD 112 billion. According to the IMF recommendations, Iraq requires higher and more sustainable non-oil growth to accommodate the rapidly expanding labor force, boost non-oil exports and government revenue, and mitigate the economy's susceptibility to oil price fluctuations. Key reform priorities encompass adopting a comprehensive employment strategy, expediting financial sector reform to enhance credit accessibility, implementing a thorough pension reform, combating corruption, improving governance, and eliminating other barriers hindering private sector development.

According to the World Bank, the unemployment rate stood at 15.3% in 2022 (latest data available). As per the Ministry of Planning, the poverty rate in the country has escalated to 25%, marking an uptick of approximately three percentage points from the pre-pandemic level. The country has a low GDP per capita, estimated at USD 10,865 in 2022 by the World Bank (PPP).

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 261.14254.99271.47281.79291.56
GDP (Constant Prices, Annual % Change) 7.0-2.72.94.03.6
GDP per Capita (USD) 6,1815,8836,1046,1766,228
General Government Gross Debt (in % of GDP) 44.949.254.661.468.6
Inflation Rate (%) n/a5.33.62.92.4
Current Account (billions USD) 45.05-4.94-11.72-16.62-20.75
Current Account (in % of GDP) 17.3-1.9-4.3-5.9-7.1

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

Iraq's 45.5 million population includes a workforce of 11.3 million. The agricultural sector accounts for only 2.9% of GDP and employs around 8% of the labor force (World Bank, latest data available), due to the prevalence of less modern and productive methods. About a quarter of the total land area is suitable for intensive cultivation and animal husbandry. Most of the agricultural activity is concentrated in the fertile lowlands in the Mesopotamian plains that are irrigated from the Tigris and the Euphrates, and include cereals, pulses, and dates. Nonetheless, Iraq is still a net food importer.

Industry accounts for 62.7% of GDP and employs 28% of the workforce (World Bank). Its relative share in the economy continues to pick up after hitting a 30-year low in 2015 but remains much lower than levels seen in the early 2000s. Iraq's largely state-run economy is dominated by the oil sector, which provides roughly 90% of government revenue and 80% of foreign exchange earnings (OPEC). The manufacturing sector as a whole is estimated to account for only 2% of the country’s GDP. Iraq’s public sector manufacturing output reached an estimated value of USD 1 billion in 2023, according to the country’s industry minister.

The services sector is estimated to constitute 34.8% of Iraq's GDP and employs 64% of the workforce (World Bank). Iraq is one of the Middle East's most underbanked countries, but the banking sector, which is still mostly state-owned, is taking significant steps toward financial inclusion thanks to a new electronic payments system to disburse government salaries and welfare to some seven million citizens. The public sector holds significant dominance in Iraq's retail industry, particularly in the realm of food products.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 19.8 21.3 58.9
Value Added (in % of GDP) 2.9 62.7 34.8
Value Added (Annual % Change) -10.6 11.2 1.1

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Iraqi Dinar (IQD) - Average Annual Exchange Rate For 1 MUR 33.2634.3434.850.0330.29

Source: World Bank - Latest available data.

 
 

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Country Risk

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Foreign Trade in Figures

Iraq, the world´s fifth biggest producer and fourth largest exporter of oil, is relatively open to foreign trade, which represents around 62% of the country's GDP (World Bank, latest data available). The Iraqi government’s new trade policy aims to integrate the country’s economy into regional and international markets and consequently the country has very few trade barriers. Crude oil accounts for more than 95% of Iraqi exports whereas petroleum products make up for the rest. Iraq's primary imports include refined petroleum, broadcasting equipment, cars, jewellery, and rolled tobacco (data OEC, 2022).

According to OEC, the country’s main export partners in 2022 were India (USD 38.8 billion), China (USD 34 billion), United States (USD 10.3 billion), South Korea (USD 8.21 billion), and Greece (USD 6.27 billion); whereas imports came chiefly from the United Arab Emirates (USD 21.2 billion), China (USD 14B), Turkey (USD 13.7 billion), India (USD 2.45 billion), and South Korea (USD 1.15 billion). The Iraqi government implemented new laws to strengthen trade and has more recently sought to build a highway between Baghdad and Cairo via Amman to boost trade relations between Iraq, Egypt and Jordan. Iraq has also invested in strengthening its hydrocarbon export capacity, primarily by building a port located in the Persian Gulf. However, insecurity, high levels of corruption, fragile institutions, lack of legal protections and poorly implemented structural reforms discourage foreign trade.

The country maintains a structural trade surplus for merchandise, largely attributed to its hydrocarbon exports; nevertheless, it remains highly vulnerable to oil price volatility. In 2022, Iraq exported a total of USD 123 billion against USD 67.1 billion in imports (data OEC).

 
Foreign Trade Indicators 20182019202020212022
Imports of Goods (million USD) 56,87672,28354,72250,70787,216
Exports of Goods (million USD) 92,83188,90350,61391,514138,291
Imports of Services (million USD) 18,00022,86513,79515,98623,379
Exports of Services (million USD) 5,5717,3183,8035,1776,371
Imports of Goods and Services (Annual % Change) 16.628.4-23.97.7n/a
Exports of Goods and Services (Annual % Change) 6.34.6-10.1-13.3n/a
Imports of Goods and Services (in % of GDP) 25.030.930.024.4n/a
Exports of Goods and Services (in % of GDP) 40.838.127.837.7n/a
Trade Balance (million USD) 47,48432,1685,90238,363n/a
Trade Balance (Including Service) (million USD) 35,05516,620-4,09027,554n/a
Foreign Trade (in % of GDP) 65.869.057.762.1n/a

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 
 
 
 
 

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Main Services

Source: United Nations Statistics Division, Latest Available Data

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Sources of General Economic Information

Ministries
Ministry of Interior
Ministry of Foreign Affairs
Ministry of Oil
Ministry of Industry and Minerals
Ministry of Finance
Statistical Office
Central Statistical Organization
Central Bank
Central Bank of Iraq
Stock Exchange
Iraq Stock Exchange
Search Engines
Google Iraq
Bing
Yahoo
Economic Portals
Arabian Business
Arab Economic Portal

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Political Outline

Current Political Leaders
President: Abdul Latif Rashid (since 13 October 2022)
Prime Minister: Mohammed Shia Al Sudani (since 27 October 2022)
Next Election Dates
Presidential: TBD
Legislative: October 2025
Main Political Parties
Iraq is a multi-party state. After the 2021 elections, the main parties/coalitions are:

- Progress Party (Takadum): big-tent, nonsectarianism
- Saairun (Forward) Alliance: led by prominent Shi’ite nationalist figure, Muqtada al-Sadr.
- Al-Fatah Alliance: led by pro-Iran Hadi Al-Amri, leader of Badr Corps, a guerrilla force formed by Iran to fight the Iraqi army during the war between Iraq and Iran
- State of the Law (SOL) Coalition: populist
- Kurdistan Democratic Party (KDP): Kurdish nationalism, republicanism

Other smaller, religious, local, tribal and minority parties represented in the parliament are:

- Emtidad
- NGM
- Independents
- Kurdistan Alliance
- Azem Alliance
- ANSF
- National Contract
- Tasmim Alliance
- Ishraqat Kanoon
- Rights Movement
- National Approach
- Babylon Movement
- Our People Are Our Identity
- Al Furatain Party
- Decisive Reform.

Type of State
Federal parliamentary representative republic.
Executive Power
Iraq is a federal parliamentary republic. The executive power is exercised by the Prime Minister of the Council of Ministers as the head of government, as well as the President of Iraq. The President approves laws, which are voted on by the Parliament.
The Prime Minister chairs the Council of Ministers and can dismiss a minister, with the support of a majority in the Parliament.
Legislative Power
The legislative power is held by the Council of Representatives, a parliament composed of 329 members, of whom 320 are chosen in the general elections held every four years, while 9 are appointed to represent minorities.
Formally, a Federation Council composed of representatives from the regions and governorates should assist the Council of Representatives, but in practice, it has no power as its precise composition and responsibilities are not defined in the constitution.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
163/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Not Free
Political Freedom:
5/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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Latest Update: April 2024