Publication: Iraq Economic Monitor, Fall 2019: Turning the Corner - Sustaining Growth and Creating Opportunities for Iraq’s Youth
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2019-10-20
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2019-10-19
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The Iraq Economic Monitor provides an update on key economic developments and policies over the previous six months and presents findings from recent World Bank work on Iraq, placing them in a longer-term and global context and assessing the implications of these developments and other changes in policy regarding the outlook for Iraq. Its coverage ranges from the macroeconomy to business environment and private sector development. It is intended for a wide audience, including policy makers, business leaders, financial market participants, and the community of analysts and professionals engaged in Iraq.
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“World Bank. 2019. Iraq Economic Monitor, Fall 2019: Turning the Corner - Sustaining Growth and Creating Opportunities for Iraq’s Youth. © World Bank. http://hdl.handle.net/10986/32590 License: CC BY 3.0 IGO.”
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Publication Iraq Economic Monitor, Fall 2018(World Bank, Washington, DC, 2018-10)Iraq’s overall security situation has notably improved after the defeat of ISIS, but significant challenges lie ahead. Iraq has witnessed major political and security transitions in 2017 when Prime Minister Al-Abadi announced in December the victory over ISIS after a war that lasted three years. The defeat of ISIS in Iraq left the government with the daunting tasks of rebuilding the country’s infrastructure, reconstruction of liberated areas, establishing security and stability,and providing services for the return of the displaced persons. On May 12, 2018 Iraq voted in parliamentary elections that delivered a win for a political bloc led by Moqtada al-Sadr, while PM Al-Abadi’s bloc, once seen as front runner, came in third. The ballots have been recounted after allegations of fraud and completed on August 8th without major change. On September 15th, Iraq’s parliament elected lawmaker Mohammed al-Halbousi as speaker, marking a major step towards establishing a new government. On October 2nd, Iraq’s parliament elected as president Barham Salih,who immediately named Adel Abdul Mahdi Prime Minister-designate, ending months of deadlock afterthe national election in May.Publication Iraq Economic Monitor, Fall 2021(World Bank, Washington, DC, 2021-11)The fall 2021 issue of the Iraq Economic Monitor provides an in-depth review of the latest macroeconomic and policy developments amidst a global recovery in international oil markets and as COVID-19 restrictions begin to ease. As a result, the monitor finds that the economic prospects for Iraq have improved, with GDP projected to grow from 2.6 percent in 2021 to exceed 6 percent in 2022-23, turning both fiscal and external deficits into surpluses. Nevertheless, upstream risks like oil shocks, droughts, and new COVID-19 variants; coupled with fiscal risks like growing budget rigidities, slow clearance of arrears, large exposure of state-owned banks and the central bank to the sovereign, and public investment management constraints that impact public service delivery can all materialize anytime to turn the tide as Iraq’s recent history has repeatedly shown. The breadth and depth of these challenges underscore the need for an accelerated implementation of structural reforms by the new government along the lines of the White of Paper. The Special Focus of the report discusses water scarcity and the degradation of water quality in Iraq. It highlights the large losses water issues impose across multiple sectors of the economy and the impact on vulnerable people. Indeed, a 20 percent reduction in water supply with changes in crop yields could reduce real GDP in Iraq by up to 4 percent, or US$6.6 billion. The monitor highlights the importance of dealing with those issues to reduce fragilities and identifies three reform areas to improve resilience to water scarcity and climate change impacts through water efficiency, productivity, and demand management policies; institutional solutions; and regional solutions.Publication Iraq Economic Monitor, Fall 2020(World Bank, Washington, DC, 2020-11-11)Decades of political, economic and security shocks have shaped major structural imbalances in Iraq's economy, reinforcing Iraq's current fragility trap. Iraq remains as one of the most oil dependent countries in the world. Oil accounted for over 96 percent of exports, 92 percent of government budget revenues and 43 percent of gross domestic product (GDP) in 2019. Overdependence on oil has also increased economic volatility and discouraged investment in other sectors. Multiple security shocks including regional conflicts and ISIS attacks have left little room for non-oil sector growth. An unfavorable business environment has undermined private sector's crucial role in job creation. The large size of the public sector and wage bill rigidity has restricted fiscal space required for investments in human capital and infrastructure and restricted response to economic shocks. Poor service delivery and rampant corruption along with soaring unemployment and poverty rates have led to public grievances even before the global pandemic. Iraq's economy continues to face significant macroeconomic challenges following the twin shocks of the COVID-19 pandemic and collapse in global oil markets. Iraq's GDP shrank by 6.8 percent year-on year (y/y) in the first half of 2020 (H1-20) reversing a steady improving economic growth trend over the previous two years. Depressed global energy demand and the OPEC+ production cut led Iraq's oil GDP to contract by 10.4 percent (y/y) in Q2-20. Since then, oil production declined to reach a five-year low of 3.58 mbpd in August 2020. Lower economic activity was most pronounced in the services sector, which contracted by 20.7 percent (y/y) in Q2-20, following the introduction of lockdowns and curfews in March 2020. This sharp contraction led non-oil GDP to decline by 9.2 percent (y/y) in H1-20. As of September 2020, geo-mobility data showed activity in workplace areas to have partially improved to around 20 percent below their pre COVID-19 levels. However, the surge in COVID-19 cases, which exceeded 400,000 confirmed cases and 10,000 deaths in October 2020, highlights the ongoing nature of the health crisis and the necessity to focus on saving lives to avoid longer term irreversible impacts of the crisis. Iraq's economic outlook hinges on the prospects of global oil markets and the capacity of the healthcare sector to cope with the pandemic. Improved outlook for oil markets and increased production, as part of the OPEC agreement, are expected to drive growth in 2021 and 2022 in the absence of strong reforms. If the health situation improves, growth is projected to gradually rebound from 2.0 percent in 2021 and to 7.3 percent in 2022 with non-oil economy growth projected to bounce back to an average of 4 percent in 2021–22. As such, the fiscal and external pressures are expected to remain as the twin balances remain in deficit.Publication Malaysia Economic Monitor, November 2011(World Bank, Bangkok, 2011-11)The Malaysian economy decelerated as solid domestic demand was not sufficient to offset a weakening external environment. Private consumption growth continued at a healthy pace. Favorable rubber and palm oil prices drove up incomes of smallholders while continued employment and wage growth supported urban incomes. In contrast, fixed investment was more volatile, with private investment showing signs of picking up while public investments lagged. Malaysia's overall balance of payments recorded a larger surplus in the first half of the year reflecting a widening current account surplus and substantial net financial inflows. Malaysia's open economy is expected to slow further in the remainder of 2011 and into early 2012 mainly due to the deterioration in the outlook for external demand. Cities are central to Malaysia's aspiration to become a high-income economy. Smart cities are skilled and innovative. They play a crucial role in catalyzing economic growth by generating productivity gains through agglomeration economies. Smart cities are green and sustainable. They ensure a high quality of life to all citizens and the sustainability of economic gains. Finally, smart cities are resilient.Publication Iraq Economic Monitor, Spring 2020(World Bank, Washington, DC, 2020-05-04)Iraq, once again, is facing a combination of acute shocks which the country is ill-prepared tomanage. The collapse in oil prices has considerably reduced budgetary revenues and reversed the fiscal surpluses accumulated since 2018. COVID-19, and the lockdown measures needed to contain the pandemic have dealt a severe blow to economic activities especially the services sectors like transport, trade, banking and religious tourism, which constitute around half of the non-oil economy. The growing discontent over poor service delivery, rising corruption, and lack of jobs persists and is coupled with political impasse over the formation of a new government. Iraq's pre-existing conditions going into this crisis limit its ability to manage and mitigate the socio-economic impact. A large dependency on oil revenues coupled with built-up budget rigiditieslimit Iraq's fiscal space to respond to the COVID-19 outbreak and offer a stimulus package to re-start the economy. An undiversified economy, highly dependent on oil outcomes, as well as large presence of the state in economic and commercial activities, make it hard to create the needed private sector jobs for a predominantly young population. Furthermore, rampant corruption and weak governance and service delivery fueled large scale protests across the country calling for better public service delivery and jobs. As a result, all signs indicate that this multifaceted crisis will have a protracted impact. The outlook for Iraq, which was already negative prior to the COVID-19 shock, has markedly worsened since. Near-term economic growth will be subdued by low oil prices, a new OPEC agreement that has reduced oil production quotas, and unfavorable global and domestic conditions including disruptions from COVID-19 spread. As a result, the economy is projected to contract by 9.7 percent in 2020, down from a real GDP growth of 4.4 percent in 2019, with both oil and non-oil sectors contracting by 13 and 4.4 percent respectively. This special focus on digital economy (DE) highlights the importance of digital transformation for Iraq and the urgency behind it. Iraq's economic condition was gradually improving following the deep economic strains of the last three years. However, the recent protests and unrest highlight the continued fragility of the country and the high priority of improving economic opportunities, particularly for youth. Leveraging the DE will help Iraq address some of its citizens' concerns as well as accelerate the achievement of its development objectives.
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