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Shafaq News / The American insurance agency “AM Best” classified Iraq among the most dangerous countries in the political, economic and financial fields.
The agency’s special report on Iraq came within the framework of “risk reports” related to 138 countries around the world, in which risk levels are determined for each country, in order to serve international insurance companies to fulfill their financial obligations, based on a study and evaluation of all factors that directly or indirectly affect the insurance sector. It is done by classifying countries according to their severity, as Iraq was classified among the most dangerous countries (CRT5), meaning that it poses a great risk to the financial stability of the guarantors.
The report obtained by Shafaq News Agency stated that Iraq is among the level of the highest risk countries, based on measures of the economy, politics and the financial system.
While the GDP growth during the year 2019 was 4.4%, it is expected that the outcome will be a decline of 12% in the year 2020, which is an economic decline due to the measures taken to limit the spread of the Corona epidemic and the collapse of oil prices.
Among the countries that pose a high risk, a map published by the agency shows countries such as Iraq, Egypt, Libya, Algeria, Lebanon, Ethiopia, Kenya and Nigeria.
In a depiction of the regional scene, the agency’s report said that the global collapse of oil prices in 2020 was a “big shock” for the region, given that many of its countries’ economies depend on the export of oil and gas.
The agency believed that the social and political unrest in the region may escalate, especially in countries suffering from limited resources that cannot provide incentives. She added that countries such as Saudi Arabia, the UAE, Kuwait and Qatar can absorb the economic cost of the epidemic, but other countries, such as Algeria, Tunisia and Lebanon, have less room for maneuver. The situation in Lebanon constitutes a particular instability.
She noted that many of the currencies of the region’s countries are linked to the US dollar, which limits the ability of financial policies to deal with the crisis.
On the economic risks in Iraq, the report stated that “the Iraqi economy is severely lacking in diversity, and depends heavily on the oil sector,” adding that the Corona epidemic exacerbated the country’s economic exposure. The decline in oil prices and incomes led to greater pressure on the country’s financial situation, exacerbating the deficit to reach 20% and 16% of the gross domestic product.
Because of Iraq’s strained relations with major Western countries, it is likely that it will not receive a large volume of foreign aid. The central bank set up a fund to collect donations from financial institutions and raise the equivalent of $ 37 million to confront the Corona epidemic.
He considered that inflation may worsen in the medium term, despite the decline in domestic demand and the devaluation of the national currency, which kept inflation at 1% during the year 2020.
According to the International Monetary Fund, addressing government weakness and reducing corruption will be vital for future economic development.
As for political risks, the report mentioned that government stability is under great pressure in light of the epidemic, noting that the waves of demonstrators who protested, while the risks, including those related to non-payment of salaries, have increased due to the inability of Mustafa Al-Kazemi’s government to collect enough Of revenue.
He believed that widespread corruption remains an important element, and Iraq ranks 162 out of 198 countries in Transparency International.
As for the risks of missile attacks on US military and diplomatic bases, by “militias” linked to the Popular Mobilization Forces, they have increased. In addition, ISIS is likely to take advantage of the partial withdrawal of US forces, and to escalate its attacks against security forces and energy sites in Iraq.
The agency also classified the Iraqi financial system as suffering high risks. She indicated that the Central Bank helped to stabilize the economy by financing and supporting small and medium enterprises.
According to the International Monetary Fund, a decisive strategy to reform the large state-owned banks and settle issues in the financial sector will promote private sector development and provide financial stability.
AM Best Agency was established in 1899 in New York City, and has branches around the world, including London, Dubai, Amsterdam, Hong Kong, Singapore and Mexico City. In addition to its primary work in the insurance sector, the agency publishes news reports and analysis of information related to the insurance sector.