Macroeconomic indicators of Iraqi development: analysis and development trends

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Macroeconomic indicators of Iraqi development: analysis and development trends

Tatiana A. MakarenyaPrepared by researchers in depending on https: / / data.worldbank.org/ country/IQ,

Obaidi Ahmed Ibrahim Hussein²

Abstract

Building strategic visions for any economy is based on understanding the historical path of this economy and diagnosing the mechanisms of development action in it and the main pillars upon which it is based in implementing the structure of economic activities and the extended roots in drawing the features of the current state of the national economy. This article presents a study of trends in the Iraqi economy, analyzes trends in the development and structure of GDP in industry and agriculture since 2018 and targets for 2022-2023. These indicators are analyzed taking into account the impact of the pandemic. Based on the results of the study, recommendations were made for neutralizing negative factors. According to the authors, for the development of the Iraqi economy, it is necessary to develop industry, chemical and petrochemical industries.

Keywords: national economy, microeconomic indicators, development, Iraq, economic development trends, GDP of the Republic of Iraq, Iraqi industry

МАКРОЭКОНОМИЧЕСКИЕ ПОКАЗАТЕЛИ РАЗВИТИЯ ИРАКА: АНАЛИЗ И ТЕНДЕНЦИИ РАЗВИТИЯ

Татьяна Анатольевна Макареня ¹, Али Аль-Убайди Ахмед Ибрагим Хусейн ²

Аннотация

Исследование развития любой макроэкономической системы необходимо проводить на основе анализа показателей, которые являются индикатора развития страны. В данной статье представлено исследование тенденций развития экономики Ирака, проведен анализ тенденций и структуры ВВП в разрезе промышленности, сферы услуг и сельского хозяйства начиная с 2018 г. и плановые показатели на 2022-2023 гг. Данные показатели проанализированы с учетом влияния пандемии. По результатам проведенного исследования даны рекомендации по нейтрализации негативных факторов. По мнению авторов, для развития экономики Ирака необходимо развивать электроэнергетику, химическую и нефтехимическую отрасли промышленности. iraqi economy industry

Ключевые слова: национальная экономика, Ирак, тенденции развития экономики, ВВП республики Ирак, промышленность Ирака

Iraqi microeconomic facts

Changes in Iraqi GDP

Important gains were made in budgetary revenues as average oil export prices trended above US$64/barrel. Customs and tax administration reforms outlined in the 2021 budget law started paying off, contributing to a 53% surge in domestic revenue mobilization. This was enough to turn the overall fiscal deficit (cash basis) into a small surplus of 0.6% of GDP despite spending rigidities. The current account deficit also turned into a surplus of 4.7% of GDP in Q1-21, hence boosting the official reserves of the central bank. Iraq's economic conditions are gradually improving as international oil markets recover, this recovery is also fraught by major risks posed by structural bottlenecks, including public investment management constraints that have impacted public service delivery, the slow clearance of arrears (especially those related to public wages), and large exposure of state-owned banks and the central bank to the sovereign. These fragilities are aggravated by fragile political conditions, a weak healthcare system, and rampant corruption that continue to trigger unrest across the country.

The economy is forecast to gradually recover on the back of rising oil prices and OPEC+ production quotas, which are planned to be phased out in 2022. Oil GDP will be the main driver of growth in the medium term. Non-oil GDP is forecast to recover but remain under 3% on average in 2021-2023, due to the impact of the COVID-19 Delta variant, compounded by water and electricity shortages which effect agriculture and industries. As a result, the fiscal balance is forecast to remain in surplus in the medium term leading the debt-to- GDP ratio to steadily improve.

Fig. 1. Iraqi GDP (2018-2021), millions dollars1

We can show changes in Iraqi GDP (millions dollars) as following:

Iraqi government strategy

Recognizing the severity of the crisis the Iraqi government devised the national reform plan " white paper " that sets out a blueprint of reforms to achieve sustainable medium term growth . the 2021 budget proposes measures aimed at boosting domestic revenue mobilization and public financial management, as well as announcing an 18.5 percentage percent devaluation of the (Iraqi dinar) IQD against the USD . the ultimate success of reforms depends on political will and public support to implement the proposed measures and lead the country "Iraq" out of a long-standing fragility trap. Amid persistently high perception of corruption and weak public service delivery, fiscal consolidation could give rise to social tensions and undermine reform implementation. other priorities include limiting the spread of COVID-19 and ensuring a quick vaccine rollout to manage the economic fallout from the pandemic.

The twin shocks took a heavy toll on Iraq's economy, with GDP (at factor cost) posting a contraction of 10.4 percent in 2020. Growth was weighed down by depressed global oil demand and adherence to OPEC+ production cuts agreement which led to a 17.6 % contraction in oil GDP. The non-oil economy also underwent at a 9% contraction as COVID-19 induced lockdown battered domestic demand with religious tourism and services sectors suffering from the weak domestic demand and cheaper imported goods kept inflation pressures low with headline and core inflation only edging up to 0.6 % and 1% in 2020. Cuts in oil production exerted severe pressures on government finances, with oil revenues - according for 92% of total revenue in 2019 -falling by over 45.1 % in 2020. The Iraqi government responded through cutting discretionary spending and slashing public investment. To deal with budget rigidities, especially those linked to the public wage bill and pension. Iraqi government deferred the regularization of new entrants and contractual workers to 2021 thus accruing wage arrears. Hence the 1.4 % of GDP fiscal surplus in 2019 turned in to a 4.4% of GDP deficit in 2020, raising gross budgetary financing needs to over 6.5% of GDP also following a restructuring of domestic debt held by state-owned banks and central bank of Iraq "CBI". This together with the higher value of foreign debt following IDQ devaluation also caused central government debt-to GDP ratio to increase by 21% points to 69,3% in 2020. Lower oil experts led to worsening of the current account balance, which turned from a surplus in 2019 to a 12.9 % of GDP deficit in 2020. With net foreign domestic imports "FDI" flows at only (US$ 3.2 billion] and limited other borrowing in 2020. Foreign currency reserves fell by almost US$ 13.6 billion to cover the gap by central bank. This brought reserves coverage to 9.6 months of imports by end 2020 despite a decline in imports. Iraqi macroeconomic indicators according to data of world bank April 2021: World bank, report for macroeconomics of Iraq, April 2021, https://data.worldbank.org/country/IQ

Table 1¹ - Iraqi macroeconomic indicators 2018-2023

Fig. 2. Iraqi Real GDP growth (constant market prices)1

Fig. 3. Iraqi Real GDP growth (constant factor prices)Prepared by researchers depending on https://data.worldbank.org/country/IQ Prepared by researchers depending on https://data.worldbank.org/country/IQ Prepared by researchers depending on https: / / data.worldbank.org/ country/IQ

Fig. 4. Iraqi Inflation (consumer price index)3

Fig 5. Current account balance (% of GDP)

Fig. 6. Fiscal balance (% of GDP)Prepared by researchers depending on https://data.worldbank.org/country/IQ

Final opinion and suggestions