Iraq’s GDP to contract 0.5% in 2014 on security turmoil – IMF

By bne IntelliNews December 10, 2014

Iraq’s GDP will likely shrink by 0.5% in 2014 due to the worsening security situation following the ISIS (Islamic State in Iraq and Syria) insurgency and the related economic impact, the IMF said in a statement following a mission visit. In 2013, Iraq’s GDP grew 4.2%, according to the October IMF World Economic Outlook. The GDP’s 2014 contraction forecast is, however, well above the 2.7% contraction predicted in October by the IMF.

Discussions with Iraqi authorities focused on the impact of the double shock of the Islamic State of Iraq and Syria (ISIS) insurgency and the decline in oil prices, the IMF underscored.

The IMF warned that Iraq’s non-oil growth have deteriorated since the start of the conflict due to the destruction of infrastructure, hampered access to fuel and electricity, low business confidence, and disruption in trade. The fund, however, noted that the bulk of Iraq’s oil infrastructure is in the south of the country, out of the reach of ISIS, while oil production in the Kurdish province has resumed. Iraq’s oil output thus should reach 3.3mn barrel per day in 2014, up from 3.1mn barrels a day in 2013, with exports remaining at 2013 levels of 2.5mn barrels per day, the IMF forecasts.

In 2015, Iraq’s GDP will rebound to 2% as oil production and exports increase further, supported by the recent agreement between the central government and the Kurdish autonomy on oil exports from the Kirkuk oil fields, the IMF forecasts.

The central bank of Iraq (CBI) has maintained the peg with the US dollar. The spread between the official and parallel exchange rates narrowed to 2.6% in September as the central bank took measures to liberalize the foreign exchange market, the IMF said.

Rising imports, coupled with declining oil revenues and lower government sales of foreign exchanges to the CBI to finance government spending cut Iraq’s FX reserves from over $77bn at end-2013 to about $67bn at end-November, the IMF estimated. “The government also tapped the Development Fund for Iraq (DFI), the balances of which have now been transferred to the CBI; the DFI declined from $6.5bn at end-2013 to about $4bn in November,” the IMF noted.

The Iraqi government has promised to present a draft 2015 budget to parliament soon, according to the IMF, underscoring that lack of parliamentary approval of the draft 2014 budget has triggered a fiscal rule that has partly limited spending this year.

However, off-budget spending, mainly on security, has fuelled the deficit, which will likely reach about 5% of GDP in 2014, the IMF warned. As projected financing in 2015 will be limited, The IMF now expects the government deficit to decline to less than 2% of GDP. 

Related Articles

EBRD prepares to welcome Lebanon into fold

The EBRD is set to welcome its 66th member country and the fifth from the southern and eastern Mediterranean (SEMED) region once the Lebanese government finalises the last steps of the joining ... more

Russia and Saudi Arabia to launch joint projects worth $3bn in 2017

Russia and Saudi Arabia will launch joint projects worth $3bn by the end of 2017, the speaker of Russia’s Federation Council Valentina Matviyenko said at talks with members of the Russian-Saudi ... more

Egypt’s President El Sisi to announce state of emergency after church bombings

Egypt’s President Abdel-Fattah El Sisi announced in a televised speech his intention to impose a nationwide state of emergency for three months following two deadly bomb attacks on Christian ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss