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Iraq: Economic Outline

Economic Indicators

After twelve years of embargo and many wars which led to the American invasion in 2003, the economy of Iraq has begun a fragile recovery and it starts to open its economy towards the international market. The country is endowed with very significant natural resources such as gas. Iraq also has the world's third largest oil reserve (143 billion of barrels). The hydrocarbon sector currently represents almost two-thirds of the country's GDP, which corresponds to almost the total amount of its exports.

Domestic consumption is also a very important element and it has been boosted by the revaluation of salaries and government subventions concerning basic need products. However, this growth is very volatile and it depends highly on the very uncertain political situation, given that the country's institutions are still very fragile. The law defining the national framework (federal or centralized) is always pending on the parliament's vote. This issue is essential for the stabilization process of the country since it will allow to settle the matter of the delimitation of the oil-producing province of Kirkouk, claimed by the Arabs and the Kurds. The political situation remains very fragile. During the wave of the Arab Spring, many manifestations took place in the capital and in several other Kurdish towns in Iraq.

Despite the many years spent in conflicts, the country is in a rebuilding phase and has engaged itself into the reinforcement of a stable macro-economy, as well as to diversify its economy in order to decrease its dependence on oil. Iraq benefits from the support of large international financial institutions (IMF, World's Bank), the international community (UN, EU) and bilateral agencies (USAID, DFID, JICA, AFD). Public investment has been established as the national priority. The government is finishing its legal framework for hydrocarbon, the modernization of the banking system and the state's financial management. New budget procedures have been implemented in order to face the deterioration of the fiscal situation. Iraq is also strongly affected by a very high level of corruption which rules in the country. The ONG Transparency International ranked Iraq as 175 out of 183 countries.

The social climate of the country remains highly critical and the political and security situation are still problematic. The access to water and electricity is limited, since only one Iraqi in ten has access to them through public networks. Unemployment is very high, mainly among the young and the female population (35%).  One-third of the country's total employment is in the public administration, which means that the state is the number one employer in the country. Iraq also counts with almost 3 million relocated persons and refugees.

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Last Updates: May 2012