Iraq: Economic and Political Overview

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, recovering to pre-pandemic levels. Nevertheless, Iraq’s oil-dependent economy contracted for two consecutive years in 2023 and 2024 (by 2.9% and 0.9%, respectively, according to the World Bank), driven by limited crude oil production. The GDP contraction reflected the OPEC+ production agreement from June 2024, which extended the initial production cuts through to the end of 2025 and prolonged the additional voluntary cuts of 2.2 Mbps by select countries, including Iraq, until the end of November 2024. Medium-term economic prospects will be closely tied to global oil demand and the government's fiscal policy. From 2024 to 2026, real GDP growth is expected to average 2.9%, driven by the oil sector, assuming adherence to the September 2024 OPEC+ agreement through to the end of 2025 and growing production capacity in 2026. Meanwhile, non-oil GDP is forecast to slow due to moderated government spending and other growth constraints.

Regarding public finances, Fitch projected Iraq’s budget deficit to widen to 8% of GDP in 2024, up from 2% in 2023, driven by a drop in revenue and a surge in spending. Revenues were expected to fall to 38.4% of GDP in 2024, mainly due to a 2pp decline in oil income caused by lower production and oil prices. At the same time, total spending was forecast to rise to 46.4% of GDP, largely due to an increased wage bill and pension transfers ahead of the 2025 elections, while capital expenditure remained stable at 7.1% of GDP. Looking ahead to 2025–2026, Fitch expects the deficit to average 12.4%, with revenues averaging 34.1% of GDP as lower oil prices outweigh gains from higher output and non-oil revenue remains constrained. Total expenditure is set to average 46.5% of GDP, with current spending staying elevated at 41.5%, reflecting limited flexibility in adjusting wages and transfers. Fitch estimated that Iraq’s government debt-to-GDP ratio would rise to 47.7% by the end of 2024 and reach 56.5% by 2026, up from 44.2% in 2023, as the government ramps up borrowing to cover widening deficits. Most of this financing is expected to come from the Central Bank of Iraq (CBI), primarily through indirect purchases of government securities. Iraq has seen notable inflation swings in recent years. Annual inflation was 5% in 2022 and rose to 6.6% in 2023, largely due to currency fluctuations and spillover effects from the Russia-Ukraine war. By the fourth quarter of 2024, however, inflation had eased to 2.8%, according to the Central Bank of Iraq (CBI). Core inflation, which excludes volatile food and energy prices, also fell to 2.5%, down from 4.5% in the same period of 2023.

According to the World Bank, the unemployment rate stood at 15.4% in 2023 (latest data available). Based on the upper middle-income poverty line (USD 6.85), the poverty rate stood at 24.7% in the same year. Disparities in resource distribution remain a challenge in Iraq, with poverty and limited access to basic services still concentrated in rural and southern governorates. Overall, the country has a low GDP per capita, estimated at USD 14,756 in 2024 by the IMF (PPP).

Foreign Trade in Figures

Iraq, the world´s sixth biggest producer and among the largest exporters of oil, is relatively open to foreign trade, which represents around 69% of the country's GDP (World Bank, latest data available). The Iraqi government’s 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, cars, broadcasting equipment, jewellery, and gold (data OEC, 2023).

According to the OEC, the country’s main export partners in 2023 were China (33.2%), India (27.8%), the United States (8.3%), Greece (5.3%), and the United Arab Emirates (5.3%). In contrast, imports came chiefly from the United Arab Emirates (32.2%), China (20.4%), Turkey (18.3%), India (5%), and the United States (2%). 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 2023, Iraq exported a total of USD 115.9 billion (marking a 16.1% decrease compared to the previous year amid lower hydrocarbon prices) against USD 95.5 billion in imports (+9.5% y-o-y - data WTO). According to preliminary figures from the Oil Ministry, in 2024, Iraq's oil exports averaged 3.372 million barrels per day, yielding around USD 96.08 billion in revenue, marking a 9% decrease from the previous year.

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

Economic Portals

Arabian Business
Arab Economic Portal

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