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
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 to 7.7% in 2021 and 9.3% in 2022, a recovery to pre-pandemic levels. Growth is supposed to slow doen to 4% in 2023 and 2.5% in 2024.
Iraq's strong oil production resulted to an average production of 4.133 million barrels per day in January 2022. Lower oil revenues, which account for more than 90% of export income, weighed on the current account balance, ending at a deficit of USD 18.34 billion in 2020, against a surplus of USD 1.09 billion a year earlier, 16.18 billion USD in 2021 and 46.12 billion USD in 2022. However, a swift recovery in global oil prices has boosted 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 and 36.7% in 2022. It is expected to decrease to 34.8% in 2023 and 31.6% in 2024. 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 6% in 2021, contrasting with 0.6% a year earlier, amid rising food and transportation costs. It increased again to 6.5% in 2022. 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 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 | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| GDP (billions USD) | 169.44 | 206.75 | 282.88 | 273.92 | 279.19 |
| GDP (Constant Prices, Annual % Change) | -15.7 | 7.7 | 9.3 | 4.0 | 2.5 |
| GDP per Capita (USD) | 4,222 | 5,021 | 6,696 | 6,320 | 6,278 |
| General Government Gross Debt (in % of GDP) | 84.2 | 59.1 | 36.7 | 34.8 | 31.6 |
| Inflation Rate (%) | 0.6 | 6.0 | 6.5 | 4.5 | 3.0 |
| Current Account (billions USD) | -18.34 | 16.18 | 46.12 | 35.49 | 25.91 |
| Current Account (in % of GDP) | -10.8 | 7.8 | 16.3 | 13.0 | 9.3 |
Source: IMF – World Economic Outlook Database , Latest available data
Note: (e) Estimated Data
Iraq's 38.8 milion population includes a workforce of 11.18 million. The agricultural sector accounted for 4% of GDP in 2022 (World Bank, 2023) and employed almost a fifth of the labour force with 18% (World Bank 2023) 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 53.8% of GDP and employs 23% of the work force (World Bank, 2023). 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. 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 services sector is estimated to form 43.5% of Iraq's GDP and employs 59% of the workforce (World Bank, 2023). 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) | 4.0 | 53.8 | 43.5 |
| Value Added (Annual % Change) | -17.5 | -1.1 | 14.6 |
Source: World Bank - Latest available data.
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| Monetary Indicators | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Iraqi Dinar (IQD) - Average Annual Exchange Rate For 1 MUR | 33.26 | 34.34 | 34.85 | 0.03 | 30.29 |
Source: World Bank - Latest available data.
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Iraq, the world´s seventh biggest producer and exporter of oil, is relatively open to foreign trade, which represented more than 62% of the country's GDP in 2021 (World Bank, 2023). 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. The country's main export partners are the United States (25% of total exports), India (14%), China (12%) and South Korea with 9% (Trading Economics, 2023). Others include: Italy, Japan, France and Syria.
Iraq imports was reached 50,706 million USD in 2021, down from 54,723 million USD previous year. Exports from Iraq reached 78,260 million USD (Knoema, 2023), resulting in a trade balance of + 23,537 million USD. 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 | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
| Imports of Goods (million USD) | 48,506 | 56,876 | 46,262 | 44,484 | 66,217 |
| Exports of Goods (million USD) | 63,604 | 92,831 | 82,309 | 41,738 | 86,298 |
| Imports of Services (million USD) | 16,158 | 17,785 | 22,662 | 13,679 | 13,255 |
| Exports of Services (million USD) | 5,653 | 5,306 | 6,991 | 3,499 | 4,373 |
| Imports of Goods and Services (Annual % Change) | 10.4 | 16.6 | 28.4 | -23.9 | 4.2 |
| Exports of Goods and Services (Annual % Change) | -1.0 | 6.3 | 4.6 | -10.1 | -0.7 |
| Imports of Goods and Services (in % of GDP) | 25.9 | 25.0 | 30.9 | 29.4 | 24.2 |
| Exports of Goods and Services (in % of GDP) | 33.9 | 40.8 | 38.1 | 27.2 | 37.6 |
| Trade Balance (million USD) | 25,374 | 47,484 | 32,168 | 5,902 | 38,363 |
| Trade Balance (Including Service) (million USD) | 15,150 | 35,055 | 16,620 | -4,090 | 27,554 |
| Foreign Trade (in % of GDP) | 59.8 | 65.8 | 69.0 | 56.7 | 61.8 |
Source: WTO – World Trade Organisation ; World Bank , Latest Available Data
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| 7.3 bn USD of services exported in 2019 | |
|---|---|
| 49.11% | |
| Personal travelPersonal travel | 49.11% |
| 22.70% | |
| 12.27% | |
| 8.82% | |
| 4.47% | |
| 1.52% | |
| 0.72% | |
| 0.20% | |
| 0.17% | |
| 0.02% | |
| 22.8 bn USD of services imported in 2019 | |
|---|---|
| 47.89% | |
| Personal travelPersonal travel | 47.82% |
| Business travelBusiness travel | 0.07% |
| 29.52% | |
| 10.54% | |
| 6.00% | |
| 2.71% | |
| 2.08% | |
| 0.89% | |
| 0.25% | |
| 0.06% | |
| 0.04% | |
Source: United Nations Statistics Division, Latest Available Data
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
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.).
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.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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Latest Update: March 2023
