Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Iraq’s GDP contracted by nearly 11 percent in 2020, according to the IMF. Iraq’s economy is projected to recover in 2021 but remains highly dependent on oil prices. The Iraqi Parliament approved a 2021 budget that projects a record fiscal deficit of $19.8 billion, based on an estimated oil price of $45/barrel. However, oil prices have since risen to pre-COVID-19 pandemic levels and with a gradual tapering of OPEC+ production quotas, revenues have increased significantly in 2021, exceeding Iraq’s fiscal break-even price of $64/barrel. Rising oil prices have eased the Government of Iraq’s (GOI) fiscal crisis, but also threaten to sap GOI political will to follow through on difficult but much-needed economic reforms, particularly in the run-up to October 2021 elections.
In the World Bank’s 2020 Ease of Doing Business survey, Iraq ranked 172 of 190 economies evaluated, slightly worse than 171 in 2019. Red tape, a weak banking sector, complex customs procedures, and poor investor protection were identified as major hurdles to doing business in Iraq.
In October 2020, the Iraqi Cabinet formally approved a long-anticipated “white paper” economic reform agenda. This white paper lays out sweeping goals, stating the need to move from a state-controlled economic model toward creating a robust private sector. As laid out in the white paper, the GOI should strengthen its regulatory role and improve its delivery of essential services such as education, healthcare, and social protections. The white paper calls for privatization of and productivity improvements for state-owned enterprises (SOEs) and restructuring the banking sector to spur private sector investment. However, few of the white paper’s much-needed but difficult economic reforms made it into the 2021 budget due to stiff political opposition and the lack of political will to control corruption. Nevertheless, the white paper’s architects intended it as a three-to-five year project for which any tangible progress is expected to move incrementally.
Iraq was the United States’ 49th largest goods trading partner in 2019. Top U.S. exports to Iraq by value include aircraft parts, passenger vehicles, parts for heavy machinery, and civilian aircraft and parts. Top U.S. imports from Iraq are oil, art and antiques, and jewelry.
Though not entirely free of challenges, the Kurdistan Regional Government (KRG)’s investment and trade regime is considered more favorable to the conduct of business than that of federal Iraq.