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报告摘要

Iraq Economic Monitor Summary

Core Content

The Iraq Economic Monitor provides an in-depth analysis of recent economic and policy developments in Iraq, with a special focus on the importance of digital transformation in laying the foundation for a new economy. The report highlights the challenges and opportunities in the digital economy and emphasizes the need for structural reforms to ensure sustainable growth and job creation.

Main Economic Developments

Introduction

Iraq is facing a combination of acute shocks including the collapse in oil prices, the spread of COVID-19, and persistent social and political turmoil. These shocks have significantly impacted the economy, especially the services sector, and have limited the country's ability to manage and mitigate socio-economic consequences.

Output and Demand

Growth Drivers: In 2019, oil, agriculture, and services were the main contributors to economic growth.
Non-oil GDP Growth: Non-oil GDP grew by nearly 5% in 2019, outperforming the previous three years (Figure 1).
Per Capita Growth: Despite this growth, it was not sufficient to improve per capita terms (Figure 2).
Private Consumption: Increased in 2019 due to fiscal expansion by the Government of Iraq (Gol), but was partially offset by the protests in the last quarter (Figure 5).
Imports: Reached 43% of GDP in 2019, up from 38% in 2018.

Oil and Gas Developments

Oil Prices: The collapse in oil prices has outpaced production growth, leading to a decline in revenues (Figure 7).
Oil Contribution: Oil prices stood $5 above the 2019 budgeted price, compared to $19.5 in 2018 (Figure 8).
Impact on Revenue: The decline in oil prices due to COVID-19 caused a drop in official reserves at the start of 2020 (Figure 17).
Reserve Coverage: Expected to fall from 10 months of imports in 2019 to 6 months in 2020 (Figure 18).
Oil Sector Growth: The oil sector grew by 4.2% y/y, while the non-oil economy grew by 4.9% y/y (Figure 3).

Public Finance

Budget Surplus: Fiscal loosening reduced the budget surplus in 2019 (Figure 9).
Wage Bill: Dominates recurrent spending (Figure 10), and is among the highest in the world (Figure 11).
Public Investment: Despite an improvement in execution rates, it remains below recurrent spending (Figure 12).
Debt Structure: 52% of total debt is external, 66% of that is long-term, and 9% is legacy debt prior to 1990 (Figure 14).

External Sector

Current Account Deficit: Expected to turn from a small surplus in 2019 into a significant deficit in 2020 (Figure 15).
Trade Balance: The new OPEC+ agreement and unfavorable global conditions have worsened the trade balance (Figure 16).
Exchange Rate and Inflation: Inflation remained subdued in 2019 but slightly increased in early 2020 (Figure 19).
Broad Money: Increased in 2019 due to economic activity (Figure 21).
Credit to Private Sector: Remains constrained (Figure 22).

Monetary Policy and Prices

Inflation: Subdued in 2019 but slightly increased in early 2020 (Figure 19).
Price Trends: Higher prices for some food and non-food items continued in 2019 and January 2020 (Figure 20).

Business Environment and Private Sector Development

Doing Business Rankings: Iraq continues to rank unfavorably on all Doing Business indicators compared to the MENA region (Figure 23).
Logistics Performance: Deteriorated due to conflict (Figure 24).

Outlook and Risks

Economic Outlook: The outlook for Iraq has markedly worsened since the COVID-19 shock.
Growth Projection: Near-term growth is expected to be subdued, with the economy projected to contract by 9.7% in 2020, down from 4.4% growth in 2019.
Sector Contractions: Both oil and non-oil sectors are expected to contract by 13% and 4.4%, respectively.
Fiscal Impact: The unsustainable stimulus package introduced since October, including rising public employment, lower retirement age, and various transfers, will have detrimental fiscal effects.
Budget Deficit: If oil prices stabilize in the low-30s, the budget deficit would exceed 29% of GDP in 2020.
Gross Financing Needs: Expected to reach US$67 billion (over 39% of GDP).
Exchange Rate Pressure: Local currency bonds could weaken the Central Bank of Iraq (CBI)'s balance sheet and exacerbate inflation and exchange rate pressures.
Current Account Deficit: Estimated at 18.8% of GDP in 2020, which could reduce CBI's foreign reserves to below 3 months of imports by 2022.

Risks

Political Impasse: The formation of a new government remains uncertain.
Social Unrest: Persistent protests and discontent over poor service delivery and corruption are ongoing.
Economic Vulnerability: The undiversified economy and high oil dependency make the country vulnerable to external shocks.
Humanitarian Impact: The pandemic has increased health risks for internally displaced persons (IDPs) and refugees.
Digital Divide: A significant gap exists between those with access to digital devices and the internet and those without.

Special Focus: Digital Transformation

Importance of the Digital Economy

The digital economy is seen as a critical tool for resilience and accelerating development.
Digital transformation can address citizen concerns and support job creation in a young population.
Innovative digital solutions have been deployed to sterilize hospitals, monitor affected populations, and offer remote educational and employment opportunities.

Foundational Elements of the Digital Economy

Digital Infrastructure: Includes high-speed internet and mobile broadband.
Digital Financial Services (DFS): Emphasizes cashless payments and financial inclusion.
Digital Platforms: Requires improvements in digital access and platform integration.
Digital Skills: Highlights the need to upskill youth with technological know-how.
Digital Entrepreneurship: Encourages innovation and support for startups.

Challenges and Opportunities

Challenges: Limited digital infrastructure, weak governance, and corruption.
Opportunities: Digital transformation can boost economic resilience, improve public services, and support private sector growth.

Key Recommendations

Fiscal Sustainability and Economic Governance
Financial Sector Reforms
Business Environment Reforms
Improving Human Capital Outcomes
Social Protection and Labor Systems Reforms
Agriculture and Agri-Industries Reforms
Electricity and Gas Sector Reforms

Conclusion

The digital economy is a vital component for Iraq's future growth and economic stability. Implementing reforms across all five pillars of the digital economy framework is essential to create an enabling environment for private sector-led growth, diversification, and job creation. The urgency of these reforms is underscored by the ongoing pandemic, which has exacerbated existing vulnerabilities and highlighted the need for digital solutions to support vulnerable populations.

Key Information

Non-oil GDP growth in 2019: ~5% (Figure 1).
Oil sector growth in 2019: 4.2% y/y.
Non-oil sector growth in 2019: 4.9% y/y.
Oil price in 2019: $5 above budgeted price.
FDI in 2019: Halved to US$2.9 billion (Figure 6).
Public investment in 2019: 74% executed, mostly in oil sector.
Total debt in 2019: 52% external.
Budget deficit in 2020: Projected to exceed 29% of GDP.
Gross financing needs in 2020: US$67 billion (over 39% of GDP).
Reserve coverage in 2020: Expected to fall to 6 months of imports.
Current account deficit in 2020: Estimated at 18.8% of GDP.
Digital economy framework: Includes five pillars—Digital Infrastructure, Digital Financial Services, Digital Platforms, Digital Skills, and Digital Entrepreneurship.
Digital transformation is critical for economic resilience, job creation, and development.