Iraq economy forecast to grow 1.5% in 2018, according to BMI

GDP of war torn country expected to advance 4.5% in 2019

Iraq economy set to expand 1.5 per cent in 2018 BMI Research says. Youssef Boudlal / Reuters

Iraq's economy, the second-largest producer in the Opec, is expected to post a modest recovery in 2018 and pick-up in earnest next year on the back of reconstruction efforts. Though insufficient funding and endemic corruption as well as Opec oil supply cuts will weigh on the pace of progress, according to BMI Research.

The Iraqi economy is forecast to grow 1.5 per cent in 2018 before accelerating 4.5 per cent in 2019, BMI Research, a unit of rating agency Fitch, said in a report.

“The Iraqi economy will experience a muted recovery in 2018, before picking up notably in 2019,” BMI said. “The extension of the Opec deal until end of 2018 will continue to weigh on the country’s exports through the end of the year. However, next year the completion of new development phases of major oil fields will boost production capacities and support headline growth.”

Iraq marks the fall of Saddam Hussein 15 years ago this month. The country has grappled with internal sectarian fighting since then and battled the extremist group ISIL, which took over parts of the country in 2014.

Spending on infrastructure in the years ahead will boost Iraq’s non-oil economy and higher government spending ahead of the May elections will enhance consumer spending, BMI said. The estimated cost of reconstruction for Iraq in the aftermath of the defeat of ISIL at the end of 2017 is estimated at between $88 billion and $100bn in the next decade. The government received $30bn in pledges at the International Conference for the Reconstruction of Iraq in February.

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BMI said, however, despite the massive amounts cash set to be injected into the country, it was unlikely to see growth return to the pre-ISIL levels of 13.6 per cent that Iraq witnessed between 2010 and 2013.