Apart from substantial gas resources, Iraq also has the fourth largest oil reserves in the world. Hydrocarbons represent almost two-thirds of the country’s GDP, and almost all of its exports. After years of embargo and conflict, Iraq’s economy has finally bounced back.
Iraq’s GDP grew by more than 10% in 2016, the best performance of the last decade, following the rise in oil prices. Iraq’s economic outlook is expected to improve following the emergence of a more favorable security environment. The non-oil economy is expected to rebound in 2017 after three years of contraction thanks to better security and higher non-oil spending. However, real GDP is projected to contract by 3% in 2017 due to a projected 6% decline in oil production, following the agreement reached by OPEC members in November 2016 to reduce oil production by 1.
2 million barrels a day. Due to the persistence of the low oil price in 2016, the fiscal deficit is estimated at 12% of GDP. Agriculture contributes to only 7.
7% of GDP, while the industrial and services sectors account for 45.1% and 49.2% respectively. The price of oil in Iraq is expected to average $ 47.4 per barrel in 2017, compared to an average of $ 35.6 in 2016.
A higher oil price is expected to reduce current and fiscal account deficits in general.2014 was a particularly disastrous year for Iraq, and the security situation remained fragile in 2015 and 2016. Since 2014, the Islamic State controls a third of the country’s territory, especially in the north-western region of Iraq, causing significant political unrest, an increasingly fragile security situation, and severe economic instability. More than 10% of the population has been displaced, while the country also hosts Syrian refugees. According to the IMF, 10 million Iraqis needed humanitarian aid in 2015.
Given the serious challenges and the huge financial needs of Iraq, the IMF approved a stand-by arrangement in July 2016 for a value of 5, 34 billion USD. Also in July 2016, a donor conference co-organized by the US government pledged a total of 2.1 billion USD over the 2016-2018, aimed at securing financial support for the humanitarian crisis in Iraq.Poverty, estimated by the Iraqi government, reached 22.5% nationally in 2014; and in the governorates under the influence of IS, the direct impact of economic, security and social disruptions would have doubled the poverty rate to 41.2%. Access to water, electricity and fuel is very limited.
The unemployment rate exceeds 16%, and is particularly high among young people and women. The state is the largest employer in the country.