BAGHDAD – The International Monetary Fund (IMF) expects Iraq’s economic activity to remain silent this year as oil production shrank by 1.5 percent due to OPEC’s agreement to cut oil production and a modest recovery for the non-oil sector.
The medium-term growth prospects of the Iraqi economy are positive, and growth will return to the expected moderate increase in oil production and recovery in non-oil growth, supported by the expected improvement in security and the implementation of structural reform, the IMF said in a statement on Wednesday.
“The risks are still very high, but they are mainly due to volatile security, political tensions and weak policy implementation.”
Iraq faces a double shock caused by the conflict with a push and drop in oil prices, the statement said.
Real GDP rose by 11% by the end of 2016, due to a 25% increase in oil production, which was not significantly affected by the conflict with the DUP.
The drop in oil prices has led to a decline in Iraq’s international reserves from $ 54 billion at the end of 2015 to $ 45 billion at the end of 2016.
Financial pressures continue, with the government deficit rising from 12% of GDP in 2015 to 14% in 2016, despite continued fiscal consolidation due to weak oil prices and rising humanitarian and security spending.
The IMF statement noted that the authorities have maintained an appropriate link to the exchange rate, and simplified documentation requirements implemented by the Central Bank of Iraq reduced the parallel market to 6% in June 2017.
Sinjuk confirmed Iraq’s support through a three-year reserve arrangement of 3.831 million SDRs ($ 5.380 billion), equivalent to 230 percent of the quota.