Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Iraq's gradually rebounding economy was severely hit by Covid-19 weighing on domestic demand and macroeconomic balances as well as lower global oil prices and Opec output quotas. GDP contracted to an estimated 15.7% in 2020 - by far the lowest performance since 2003 - but grew back to 7.7% in 2021 and 9.3% in 2022, a recovery to pre-pandemic levels. Growth is supposed to slow doen to 4% in 2023 and 2.5% in 2024.

Iraq's strong oil production resulted to an average production of 4.133 million barrels per day in January 2022. Lower oil revenues, which account for more than 90% of export income, weighed on the current account balance, ending at a deficit of USD 18.34 billion in 2020, against a surplus of USD 1.09 billion a year earlier, 16.18 billion USD in 2021 and 46.12 billion USD in 2022. However, a swift recovery in global oil prices has boosted Iraq's foreign trade balance. At the same time, general government gross debt rose rapidly to 84.2% in 2020 from 45.1% a year earlier, but came back to 59.4% in 2021 and 36.7% in 2022. It is expected to decrease to 34.8% in 2023 and 31.6% in 2024. The government has made efforts to cut back on costs by lowering pensions, but this led to nationwide anti-austerity protests. Iraq's public sector expanded rapidly in recent years, with payroll expenditures accounting for an increasingly higher share of the government budget year after year. Political constraints also weighed on the Iraqi economy, as the government remained in months of deadlock to appoint a new prime minister. Inflation rose to 6% in 2021, contrasting with 0.6% a year earlier, amid rising food and transportation costs. It increased again to 6.5% in 2022. The US extended its sanction waiver in 2020 to allow Iraq to import gas and electricity from Iran to cover its domestic energy needs.

The country’s social climate and political and security conditions started to improve after the defeat of ISIS, nevertheless Iraq continues to face severe security challenges. According to UNICEF, one in four Iraqi children lives in poverty and 4 million in need of assistance. Access to water, electricity and fuel is very limited. The unemployment rate is high, especially among young people and women, but reliable figures are not available (youth employment standing near 25% according to the IMF). The state represents the largest employer in the country, with four out of five jobs created in recent years are in the public sectors, according to World Bank.

Iraq’s economic outlook is mired by significant downside risks that call for accelerated implementation of structural reforms. These include: a deterioration in security conditions, the intensification of climate change shocks and additional macroeconomic volatility. Averting or mitigating the impact of downside risks depends on the policies of the future government and commitment to comprehensive reforms. Progress on regional economic integration together with an improved security environment could provide new momentum for growth and diversification (World Bank, 2022).

Any Comment About This Content? Report It to Us.