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

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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 by 3.6% in 2021, with a recovery to pre-pandemic levels expected in 2022 (10.5%) and 2023 (5.7%).

Iraq's strong oil production resulted to an average production of 4.19 million barrels per day in November 2021. Lower oil revenues, which account for more than 90% of export income, weighed on the current account balance, ending at a deficit of USD 18.28 billion in 2020, against a surplus of USD 1.09 billion a year earlier, and 12.41 billion in 2021. However, a swift recovery in global oil prices at the start of 2022 could boost Iraq's foreign trade balance. At the same time, general government gross debt rose rapidly to 84.2% in 2020 from 45.1% a year earlier but came back to 59.4% in 2021. It is expected to decrease to 55.3% in 2022 and 2023. The government has made efforts to cut back on costs by lowering pensions, but this led to nationwide anti-austerity protests. Iraq's public sector expanded rapidly in recent years, with payroll expenditures accounting for an increasingly higher share of the government budget year after year. Political constraints also weighed on the Iraqi economy, as the government remained in months of deadlock to appoint a new prime minister. Inflation rose to 0.6% in 2020, contrasting with a slight deflation of 0.2% a year earlier amid rising food and transportation costs, and then increased sharply to 6.4% in 2021. The US extended its sanction waiver in 2020 to allow Iraq to import gas and electricity from Iran to cover its domestic energy needs.

The country’s social climate and political and security conditions started to improve after the defeat of ISIS, nevertheless Iraq continues to face severe security challenges. According to UNICEF, one in four Iraqi children lives in poverty and 4 million in need of assistance. Access to water, electricity and fuel is very limited. The unemployment rate is high, especially among young people and women, but reliable figures are not available (youth employment standing near 25% according to the IMF). The state represents the largest employer in the country, with four out of five jobs created in recent years are in the public sectors, according to World Bank.

Iraq’s economic outlook is mired by significant downside risks that call for accelerated implementation of structural reforms. These include: a potential decline in the oil price, a worsening COVID-19 crisis due to the spread of new variants, a deterioration in security conditions, the intensification of climate change shocks and additional macroeconomic volatility. Averting or mitigating the impact of downside risks depends on the policies of the future government and commitment to comprehensive reforms. Progress on regional economic integration together with an improved security environment could provide new momentum for growth and diversification (World Bank, 2022).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 233.95169.49e201.47226.62239.99
GDP (Constant Prices, Annual % Change) 5.8-15.7e3.610.55.7
GDP per Capita (USD) 5,981e4,223e4,8935,3645,537
General Government Gross Debt (in % of GDP) 45.1e84.259.455.355.3
Inflation Rate (%) -0.20.66.44.52.6
Current Account (billions USD) 1.09-18.2812.419.073.67
Current Account (in % of GDP) 0.5-10.86.24.01.5

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Iraq's 39.1 milion population includes a workforce of 10.35 million. The agricultural sector accounted for 5.9% of GDP in 2021 (World Bank, 2022) and employed almost a fifth of the labour force with 18% (World Bank 2022) 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 irrigated from the Tigris and the Euphrates, and includes cereals, pulse and dates. Nonetheless, Iraq is still a net food importer.

Industry accounts for 41.9% of GDP and employs 23% of the work force (World Bank, 2022). 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 early 2000s. Iaq's largely state-run economy is dominated by the oil sector, which provides roughly 85% of government revenue and 80% of foreign exchange earnings (CIA World Factbook).

The services sector is estimated to form 54.2% of Iraq's GDP and employs 59% of the workforce (World Bank, 2022). Iraq is one of the Middle East's most underbanked countries, but the banking sector, which is still mostly state-owned, is giving significant steps to financial inclusion thanks to a new electronical payments system to disburse government salaries and welfare to some seven million citizens.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 18.3 22.9 58.8
Value Added (in % of GDP) 6.1 44.4 50.8
Value Added (Annual % Change) 14.0 -11.6 -12.5

Source: World Bank - Latest available data.

 

Find more information about your business sector on our service Market Reports.

 
 
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.

 
 

Find out all the exchange rates daily on our service Currency Converter.

Learn more about Market Analyses about Iraq on Globaltrade.net, the Directory for International Trade Service Providers.

 
 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

Iraq is relatively open to foreign trade, which represented more than 69% of the country's GDP in 2019 (World Bank, 2022). 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 90% of Iraqi exports whereas petroleum products make up for the rest. Gas and other gaseous hydrocarbons are among Iraq's main items of import, followed by tubes and pipes, as well as electrical transformers and cars.

United Arab Emirates and Turkey are among the major trading partners of Iraq. India, China and the United States are the top three destinations for Iraqi exports whereas Turkey and China are by the far the main suppliers in Iraq, accounting for nearly 60% of imports in Iraq (Comtrade, 2021).

Iraqi exports of goods fell to 41.7 billion USD in 2020 from 82.3 billion in 2019, while those of services fell to 3.5 billion USD from 7 billions USD. At the same time, imports of goods declined to 44.4 billion USD, and those of services fell to 13.6 billion USD. Trade surplus narrowed to 5.88 billion USD from 32.16 billion USD a year earlier. 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, on the top of the COVID19 pandemic, insecurity, high levels of corruption, fragile institutions, lack of legal protections and poorly implemented structural reforms discourage foreign trade.

 
Foreign Trade Indicators 20162017201820192020
Imports of Goods (million USD) 47,90048,50656,87646,26244,484
Exports of Goods (million USD) 43,73563,60492,83182,30941,738
Imports of Services (million USD) 10,03716,15817,78522,66213,679
Exports of Services (million USD) 4,8355,6535,3066,9913,499
Imports of Goods and Services (Annual % Change) -22.310.416.628.4n/a
Exports of Goods and Services (Annual % Change) 2.3-0.49.42.7n/a
Imports of Goods and Services (in % of GDP) 26.525.426.832.5n/a
Exports of Goods and Services (in % of GDP) 28.133.343.740.0n/a
Trade Balance (million USD) 12,22125,37447,48432,1685,883
Trade Balance (Including Service) (million USD) 2,71415,15035,05516,620-4,110
Foreign Trade (in % of GDP) 54.658.770.572.5n/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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Political Outline

Current Political Leaders
President: Barham Salih (since October 2018)
Prime Minister: Mustafa Al-Kadhimi (since May 2020)
Next Election Dates
Legislative: October 2025
Main Political Parties
Iraq is a multi-party state. After the 2021 elections, the four main parties are:
- the Saairun (Forward) Alliance: led by prominent Shi’ite nationalist figure, Muqtada al-Sadr.
- the 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
- the al-Nasr (Victory) Alliance: the party of the Prime Minister Haider al-Abadi, which only came in third in the elections;
- the State of the Law (SOL) Coalition;
- the Kurdistan Democratic Party (KDP)

Other numerous smaller, religious, local, tribal and minority parties are:
-Al Sadiqun Bloc
-Badr Organization
-Da`wa Party
-Fadilah Party
-Goran Movement
-Iraqi Communist Party
-Islamic Supreme Council of Iraq (ISCI)
-National Wisdom Trend
-New Generation Movement
-Our Identity
-Patriotic Union of Kurdistan (PUK)
-Wataniyah coalition

Type of State
Federal Parliamentary Representative Democratic 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 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 hold by the Council of Representatives, a parliament composed by 329 members, of whom 320 chosen in the general elections held every four years, while 9 are appointed to represent minorities.
Formally, a Federation Council composed by 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

Source: World Press Freedom Index, Reporters Without Borders

 

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

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Iraq, please visit this local media.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
The most up to date sanitary measures established officially are available on the government´s website . Additionnaly, the latest Iraq’s Ministry of Health guidance to the public can be found here.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Iraq´s Ministry of Foreign Affairs
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Iraq on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
Most of the economic measures taken by the Iraq government to address the impact of the COVID-19 pandemic on the national economy are addressed here.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Iraq government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Iraq in the IMF’s Policy Tracker platform.
Support plan for businesses
The latest information with regards to business supports in Iraq following the coronavirus epidemic outbreak can be found on the website of the Government of Iraq
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
The country's government official sources do not provide yet information with regards to specific schemes in support of business or exporting companies following the coronavirus epidemic outbreak. For the updated information please visit the website of the Iraqui Governement
 

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Latest Update: April 2022