By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The market’s action in July was so quiet that it turned activities like watching paint dry into spectator sports, as the start of the peak summer and holiday season depressed trading volumes.

Nonetheless, the average daily turnover’s decline of −15% month-on-month did not erase the turnover gains made in the prior two months, small as they were.

For the month, the market, as measured by the Rabee Securities RSISX USD Index (RSISUSD), was down −4.40% and down −3.97% for the year.

The highlight of the month, though, was the release of the latest IMF country report for Iraq, in which the IMF updated its estimates, last made in the summer of 2017, for both the future economic outlook and for the last few years. The changes to its GDP growth estimates for the crisis years 2014-2017 were as follows:

Year 2014 2015 2016 2017
Old estimates +0.7% +4.8% +11.0% -0.4%
New estimates +0.7% +2.5% +15.2% -2.5%

While estimates for the years following the conflict changed as follows:

Year 2018 2019 2020 2021
Old estimates +2.9% +1.7% +2.0% +2.1%
New estimates -0.6% +4.6% +5.3% +2.6%

The main takeaway is that the crisis years were, on the whole, weaker than initially expected. While, 2018, the first year following the conflict, was the second year of a deep recession with a contraction of -0.6% on the back of the prior year’s -2.5% decline, instead of being a first year of an economic recovery, at +2.9%, following a shallower decline of -0.4%  -a message telegraphed by companies listed on the Iraq Stock Exchange (ISX) over the last two years. On the other hand, the expected recovery in 2019/2020 would be much stronger than estimated earlier with GDP growing at +4.6%/+5.3% instead of +1.7%/+2.0%.

Higher oil exports and the improved oil pricing environment, over the last two years, resulted in much higher government revenues, than estimated earlier, from 2017 onwards. This, with a long lag, is initially translating into increased consumer spending in 2019, given that the government employs over 50% of the working population. This, would then, be followed by the government’s investment spending powering the non-oil economy. Subsequently, the IMF’s new assumptions on non-oil GDP growth rates are crucial for the economy and the stock market. The IMF’s estimates for the severe contraction in non-oil GDP during the crisis years changed as follows:

Year 2014 2015 2016 2017
Old estimates -3.9% -9.6% -8.1% +1.5%
New estimates -3.9% -14.4% +1.3% -0.6%

Accordingly, the downward trajectory in 2015 was much steeper at −14.4% than earlier estimates of −9.6%, while the stability expected for 2017 was, instead, a double dip recession following the bounce in 2016. Also, the contraction lasted longer at four years than earlier expectations of three years. While estimates for the years following the conflict changed as follows:

Year 2018 2019 2020 2021
Old estimates +2.0% +3.0% +3.9% +4.0%
New estimates +0.8% +5.4% +5.0% +4.1%

Confirming the earlier message that 2018 was the second year in a contraction with the non-oil GDP dragging the overall GDP down, negating the strong contributions of higher oil prices and exports to the overall GDP growth. Subsequently, the expected recovery for 2019/2020 would be much stronger at +5.4%/+5.0% versus earlier estimates of +3.0%/+3.9%. The changes, for outlook for non-oil GDP growth, are consistent with the analysis, made here over the last few months, on the drag on the economy in 2018 and early 2019 as a result of the political paralysis before, during, and after the May 2018 parliamentary elections. A paralysis that would have ended in March as the 2019 budget was only passed into law in late February 2019.

Furthermore, the IMF estimates that non-oil investment spending for 2019 would be about USD 11.25bln, or an +8.5% stimulus to the new non-oil GDP estimate for 2019. It’s unlikely, that the government would be able to spend all of the budgeted amount in 2019, given the slow nature of investment spending, and the government’s historic under-execution of such spending. Which probably explains the IMF’s estimates for investment spending at about 13.5% less than that projected by the 2019 government budget.

(Source: IMF, country reports no. 17/251 and 19/248, Asia Frontier Capital)

On the heels of the new IMF report, the Ministry of Finance (MoF) data as of May, show a month-on-month growth in investment spending of +20%, but from a very small base, as the January-May investment spending is only about 8% of the non-oil investment spending budget of USD 11.25bln. Implying that most of the estimated +5.4% growth in non-oil GDP for 2019 would be backend loaded, and thus a much stronger growth is anticipated in the second half of 2019 than the first half. It will likely accelerate further in 2020, as the unfinished spending for 2019 spills over into 2020. The government has considerable firepower at its disposal to continue investment spending, even as it continues to under-execute, as the same MoF data for May shows a further growth in budget surplus for 2019 at USD 3.3bln, for a cumulative 29-month surplus of USD 26.5bln.

As postulated here in the past, this investment spending which started with a trickle in 2019, should grow as the full spending gets underway, carrying over into 2020, and ultimately would lead to a sustained economic recovery in line with the new IMF’s future outlook, or probably somewhat higher given the multiplier effects of such spending.

The news from the corporate world supports the economic picture painted by the IMF as evidenced from a number of corporate earnings reports for the second quarter. Pepsi bottler, Baghdad Soft Drinks (IBSD), continued its strong growth with revenues for the six months in 2019 up +3% over the same period in 2018, with its pre-tax profits for the same period up +9%. Telecom operators AsiaCell Communications (TASC) and Zain Iraq (TZNI) reported increased customers by 6% and 4% respectively for the six months in 2019 versus the same period in 2018. However, both revenues and earnings continued, for the same period, to show an industry in the early stages of recovery with TASC having flat revenues but earnings before interest depreciation and amortization (EBITDA) down −9%, while TZNI reported revenues declining −6% and EBITDA up +13%. Both companies cited increased competition and marketing costs.

Bank of Baghdad’s (BBOB) second quarter (Q2) numbers, marked a bank following through with the recovery that began in 2018, which, while confirming the initial signs of a gradual recovery in the sector, also disappointed local speculators who were hoping for a repeat performance of the first quarter (Q1). Deposits continued to grow at +4.3% for the first half of 2019 versus the same period in 2018, while credit growth continued to be negative at −1.4%- which is a slower rate compared with the past- and led to a drop of −27.1% in net interest income. FX income recovered +57.0%, which is an easy comparison given the severe drop seen in the same period in 2018, but nevertheless pointing to a stabilization in this income source. Commission income, continuing to rise in importance, was up +21.3%. Net income, while up +983% in the period or at over 10x the figure for the same period in 2018, while very healthy, was mostly achieved in Q1. Therfore, while Q2’s net income showed continued growth, it nevertheless poured cold water over speculative hopes for the bank to resume dividend payments for 2018’s earnings. It was these hopes that led to a +62.5% rally in the stock in May, which soon moderated to a decline of −12.8% in June, and declined a further −17.6% in July as the bank confirmed in its AGM that it would not pay dividends for the year. The stock’s closing price in July, is still up +16.6% from the April close before it started its wild three-month ride. While, BBOB pulled the other leading banks up with it in May, it did not drag them lower in June and July which is very different from the market’s responses to such disappointments in 2018. That time all banks were painted by the same brush, which shows a market that has begun to discriminate showing it has likely bottomed or is making a bottom.

Trading activity in August will likely continue to be in-line with that of July’s activity, as it is part of the peak of the summer season and will include the second Eid holiday break of the year. While, there is no new source of liquidity in the market, and local speculators continue to dominate activity, foreign investors have been consistent net buyers over the last few of months in a marked contrast from the picture for most of the prior months as the chart below shows.

Index of net foreign activity on the Iraq Stock Exchange (ISX)

(Source: Iraq Stock Exchange (ISX), Asia Frontier Capital)

The extension of the June pull-back in July, continues to suggests the beginning of a consolidation phase, which would need a significant recovery in turnover before a recovery can become sustainable and for the market, as measured by the Rabee Securities RSISX USD Index (RSISUSD), to claw back some of the −70.5% decline from the peak in early 2014 to July’s 2019 closing levels.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The market’s action in July was so quiet that it turned activities like watching paint dry into spectator sports, as the start of the peak summer and holiday season depressed trading volumes.

Nonetheless, the average daily turnover’s decline of −15% month-on-month did not erase the turnover gains made in the prior two months, small as they were.

For the month, the market, as measured by the Rabee Securities RSISX USD Index (RSISUSD), was down −4.40% and down −3.97% for the year.

The highlight of the month, though, was the release of the latest IMF country report for Iraq, in which the IMF updated its estimates, last made in the summer of 2017, for both the future economic outlook and for the last few years. The changes to its GDP growth estimates for the crisis years 2014-2017 were as follows:

Year 2014 2015 2016 2017
Old estimates +0.7% +4.8% +11.0% -0.4%
New estimates +0.7% +2.5% +15.2% -2.5%

While estimates for the years following the conflict changed as follows:

Year 2018 2019 2020 2021
Old estimates +2.9% +1.7% +2.0% +2.1%
New estimates -0.6% +4.6% +5.3% +2.6%

The main takeaway is that the crisis years were, on the whole, weaker than initially expected. While, 2018, the first year following the conflict, was the second year of a deep recession with a contraction of -0.6% on the back of the prior year’s -2.5% decline, instead of being a first year of an economic recovery, at +2.9%, following a shallower decline of -0.4%  -a message telegraphed by companies listed on the Iraq Stock Exchange (ISX) over the last two years. On the other hand, the expected recovery in 2019/2020 would be much stronger than estimated earlier with GDP growing at +4.6%/+5.3% instead of +1.7%/+2.0%.

Higher oil exports and the improved oil pricing environment, over the last two years, resulted in much higher government revenues, than estimated earlier, from 2017 onwards. This, with a long lag, is initially translating into increased consumer spending in 2019, given that the government employs over 50% of the working population. This, would then, be followed by the government’s investment spending powering the non-oil economy. Subsequently, the IMF’s new assumptions on non-oil GDP growth rates are crucial for the economy and the stock market. The IMF’s estimates for the severe contraction in non-oil GDP during the crisis years changed as follows:

Year 2014 2015 2016 2017
Old estimates -3.9% -9.6% -8.1% +1.5%
New estimates -3.9% -14.4% +1.3% -0.6%

Accordingly, the downward trajectory in 2015 was much steeper at −14.4% than earlier estimates of −9.6%, while the stability expected for 2017 was, instead, a double dip recession following the bounce in 2016. Also, the contraction lasted longer at four years than earlier expectations of three years. While estimates for the years following the conflict changed as follows:

Year 2018 2019 2020 2021
Old estimates +2.0% +3.0% +3.9% +4.0%
New estimates +0.8% +5.4% +5.0% +4.1%

Confirming the earlier message that 2018 was the second year in a contraction with the non-oil GDP dragging the overall GDP down, negating the strong contributions of higher oil prices and exports to the overall GDP growth. Subsequently, the expected recovery for 2019/2020 would be much stronger at +5.4%/+5.0% versus earlier estimates of +3.0%/+3.9%. The changes, for outlook for non-oil GDP growth, are consistent with the analysis, made here over the last few months, on the drag on the economy in 2018 and early 2019 as a result of the political paralysis before, during, and after the May 2018 parliamentary elections. A paralysis that would have ended in March as the 2019 budget was only passed into law in late February 2019.

Furthermore, the IMF estimates that non-oil investment spending for 2019 would be about USD 11.25bln, or an +8.5% stimulus to the new non-oil GDP estimate for 2019. It’s unlikely, that the government would be able to spend all of the budgeted amount in 2019, given the slow nature of investment spending, and the government’s historic under-execution of such spending. Which probably explains the IMF’s estimates for investment spending at about 13.5% less than that projected by the 2019 government budget.

(Source: IMF, country reports no. 17/251 and 19/248, Asia Frontier Capital)

On the heels of the new IMF report, the Ministry of Finance (MoF) data as of May, show a month-on-month growth in investment spending of +20%, but from a very small base, as the January-May investment spending is only about 8% of the non-oil investment spending budget of USD 11.25bln. Implying that most of the estimated +5.4% growth in non-oil GDP for 2019 would be backend loaded, and thus a much stronger growth is anticipated in the second half of 2019 than the first half. It will likely accelerate further in 2020, as the unfinished spending for 2019 spills over into 2020. The government has considerable firepower at its disposal to continue investment spending, even as it continues to under-execute, as the same MoF data for May shows a further growth in budget surplus for 2019 at USD 3.3bln, for a cumulative 29-month surplus of USD 26.5bln.

As postulated here in the past, this investment spending which started with a trickle in 2019, should grow as the full spending gets underway, carrying over into 2020, and ultimately would lead to a sustained economic recovery in line with the new IMF’s future outlook, or probably somewhat higher given the multiplier effects of such spending.

The news from the corporate world supports the economic picture painted by the IMF as evidenced from a number of corporate earnings reports for the second quarter. Pepsi bottler, Baghdad Soft Drinks (IBSD), continued its strong growth with revenues for the six months in 2019 up +3% over the same period in 2018, with its pre-tax profits for the same period up +9%. Telecom operators AsiaCell Communications (TASC) and Zain Iraq (TZNI) reported increased customers by 6% and 4% respectively for the six months in 2019 versus the same period in 2018. However, both revenues and earnings continued, for the same period, to show an industry in the early stages of recovery with TASC having flat revenues but earnings before interest depreciation and amortization (EBITDA) down −9%, while TZNI reported revenues declining −6% and EBITDA up +13%. Both companies cited increased competition and marketing costs.

Bank of Baghdad’s (BBOB) second quarter (Q2) numbers, marked a bank following through with the recovery that began in 2018, which, while confirming the initial signs of a gradual recovery in the sector, also disappointed local speculators who were hoping for a repeat performance of the first quarter (Q1). Deposits continued to grow at +4.3% for the first half of 2019 versus the same period in 2018, while credit growth continued to be negative at −1.4%- which is a slower rate compared with the past- and led to a drop of −27.1% in net interest income. FX income recovered +57.0%, which is an easy comparison given the severe drop seen in the same period in 2018, but nevertheless pointing to a stabilization in this income source. Commission income, continuing to rise in importance, was up +21.3%. Net income, while up +983% in the period or at over 10x the figure for the same period in 2018, while very healthy, was mostly achieved in Q1. Therfore, while Q2’s net income showed continued growth, it nevertheless poured cold water over speculative hopes for the bank to resume dividend payments for 2018’s earnings. It was these hopes that led to a +62.5% rally in the stock in May, which soon moderated to a decline of −12.8% in June, and declined a further −17.6% in July as the bank confirmed in its AGM that it would not pay dividends for the year. The stock’s closing price in July, is still up +16.6% from the April close before it started its wild three-month ride. While, BBOB pulled the other leading banks up with it in May, it did not drag them lower in June and July which is very different from the market’s responses to such disappointments in 2018. That time all banks were painted by the same brush, which shows a market that has begun to discriminate showing it has likely bottomed or is making a bottom.

Trading activity in August will likely continue to be in-line with that of July’s activity, as it is part of the peak of the summer season and will include the second Eid holiday break of the year. While, there is no new source of liquidity in the market, and local speculators continue to dominate activity, foreign investors have been consistent net buyers over the last few of months in a marked contrast from the picture for most of the prior months as the chart below shows.

Index of net foreign activity on the Iraq Stock Exchange (ISX)

(Source: Iraq Stock Exchange (ISX), Asia Frontier Capital)

The extension of the June pull-back in July, continues to suggests the beginning of a consolidation phase, which would need a significant recovery in turnover before a recovery can become sustainable and for the market, as measured by the Rabee Securities RSISX USD Index (RSISUSD), to claw back some of the −70.5% decline from the peak in early 2014 to July’s 2019 closing levels.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The market’s action in July was so quiet that it turned activities like watching paint dry into spectator sports, as the start of the peak summer and holiday season depressed trading volumes.

Nonetheless, the average daily turnover’s decline of −15% month-on-month did not erase the turnover gains made in the prior two months, small as they were.

For the month, the market, as measured by the Rabee Securities RSISX USD Index (RSISUSD), was down −4.40% and down −3.97% for the year.

Please click here to download Ahmed Tabaqchali’s full report.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

IMF Staff Completes 2019 Article IV Mission on Iraq

An International Monetary Fund (IMF) team led by Gavin Gray visited Amman from April 26 to May 2, to hold discussions with the Iraqi authorities in the context of the 2019 Article IV Consultation.

At the end of the visit, Mr. Gray made the following statement:

“The end of the war with ISIS and a rebound in oil prices provide an opportunity to rebuild the country and address long-standing socio-economic needs. However, the challenges to achieving these objectives are formidable. The economic recovery has been sluggish, post-war reconstruction is limited, and large current spending increases risk placing the public finances and central bank reserves on an unsustainable path. Moreover, combatting corruption is critical to promote the effectiveness of public institutions and to support private-sector investment and job creation.

“Near-term vulnerabilities subsided in 2018, with the budget in surplus and a build-up in central bank reserves. Non-oil growth is expected to increase to 5.4 percent in 2019 on the back of higher investment spending. However, fiscal deficits are projected to rise over the medium term, requiring financing that may crowd out the private sector or erode central bank reserves. In these circumstances, it would be hard to sustain capital spending, and growth would slow markedly.

“Policy changes and structural reforms—including to improve governance—are therefore essential to maintain medium-term sustainability and lay the foundations for inclusive growth.

“Fiscal policy should aim to scale up public investment gradually while building fiscal buffers. To make space for this, staff recommends budgetary savings of around 9 percent of GDP over the medium term through tight control of current spending, particularly public-sector wages, and phased measures to boost non-oil revenue. Setting ceilings on current expenditure in the 2020 budget onwards would strengthen the fiscal framework’s capacity to support higher capital spending and to adapt to oil price shocks. Key reforms should include:

  • Containing public-sector wages. Spending pressures could be dampened in the short run through compensation measures such as capping allowances, bonuses and other non‑base wage payments, and by not fully replacing retirees. Structural measures will be required over the medium term, based on a functional workforce review as well as deeper civil service reform once new HR management and information systems are in place.
  • Electricity reforms are key to addressing the weak quality of service and reducing the high budgetary costs, due to modest tariff rates, chronic non-payment of electricity bills, poor maintenance and over-reliance on expensive generation sources, coupled with losses throughout the generation, transmission, and distribution process. It would be important to ensure that the poor and most vulnerable are protected throughout this reform.
  • Bolstering public financial management. Enhancing the legal framework and improving commitment and other control systems are key to minimizing misuse of public resources and restoring budgetary discipline.

“In the financial sector, a robust plan to restructure the large public banks coupled with enhanced supervision is essential to secure financial stability and will help promote financial development and inclusion. Strengthening anti-money laundering and countering financing terrorism (AML/CFT) controls and oversight will help prevent Iraq’s financial sector from being misused for the laundering of criminal proceeds and terrorist financing.

“Addressing governance weaknesses and corruption vulnerabilities is critical to achieving the described policy objectives. As a first step, the authorities need to develop a comprehensive understanding of the corruption risks present in Iraq and then implement policies to tackle these risks in a coherent and coordinated manner. The legislative framework needs to be strengthened to effectively prevent officials from abusing their position or misusing state resources. To this end, laws strengthening the asset declaration regime and criminalizing illicit gains should be rapidly adopted. Furthermore, the independence and integrity of bodies involved in combatting corruption should be ensured and the AML/CFT regime should be mobilized to support anti-corruption efforts.

The team will prepare a report that, subject to management approval, is tentatively scheduled to be considered by the IMF’s Executive Board in July 2019.

“The IMF team would like to thank the authorities for the candid and constructive discussions during this visit.”

(Source: IMF)

By Dr. Layth Mahdi.

The opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Challenges Facing the New Government: The End of Iraq or Its Revival

The liberation of Iraq has given the country freedom; however this democracy has transformed into chaos with the spread of corruption, militias, tribes and outlaws. The root of the looming crisis is the inability of the GOI to successfully implement initiatives to address the dire situation in Iraq.

Iraq suffers from an economic crises after 2003, the most important of which is the decline of non oil GDP, primarily in the manufacturing and agricultural sectors.

The manufacturing sector GDP fell from 14% to 1%. The majority of factories in Iraq are not operating due to the lack of resources, maintenance, or expertise. The Ministry of Industry has 192 major factories including poultry, dairy, cement, glass & steel not operating. The private sector has 40,000 factories, 95% of which are not operational. Prior to 2003 the government would provide subsidized utilities and limit imports to promote domestic production.

The agricultural GDP dropped from 12% to 2% as the programs and policies in place were unable to effectively revive the agricultural farms. This was due to the GOI eliminating the previously subsidized programs and implemented a free market over night. Which led to the farmers abandoning their lands and migrating to the cities seeking employment. Iraq is now faced with a reluctance of their population returning back to the farmlands outside of the cities.

According to official statistics of the Ministry of Planning for 2018 and some other sources, the population of Iraq is 38 million people, and the proportion of youth reached 28% (10.5 million) making up 36% of the workforce (6.7 million). In addition, the percentage of poverty in the areas liberated from ISIS reached 40%, 30% in the south, 23% in the center and 12% in the Kurdistan region. More than 12 million people live below the poverty line ($ 3 / day). The percentage of poor children in the south has exceeded 50% and the illiteracy rate has spread to a large extent and reached 25%, especially in the poor and remote areas.

The Ministry of Planning and the World Bank announced the Poverty Reduction Strategy Project (2018-2022) with the aim to drop the poverty rate 25% by 2022. I believe this is very ambitious and unattainable with the current leadership and government, as the population of Iraq (38 m) will increase by one million annually. The state should provide over 250 thousand jobs annually to alleviate the poverty rate, and this is not possible because the private and public sector is disabled. The poverty rate will instead increase annually.

Previous National Development Programs of 2010-2014 and 2013-2017 have failed to alleviate the poverty rate because of the lack of vision and inefficiency of directors involved in the projects.

Job creation and poverty reduction are linked to several Ministries and other Government Institutions. These Ministries are influenced by different parties are not cooperating with each other, so the proposed poverty reduction project will fail.

The Prime Minister Dr. Adil Abd Al Mahdi, faces major challenges to improve the economy, create jobs and reduce poverty before it is too late. He should establish a centralized office that will lead all Ministries together to achieve the project goals.

Iraq must also cooperate and include the American expertise in line with the 2008 Strategic Framework Agreement between the USA and Iraq.

I presented a proposal and solution personally to the Prime Minster in December 2018, however without success. I still believe that this is the only right path to the success of the Prime Minister’s tasks. He has no other choice.

By John Lee.

GDP growth in Iraq is expected to hit 4.1 percent in 2019, up from 2.8 percent this year, acccording to data from Moody’s.

The gain is based on an expectation of oil prices averaging $75 per barrel, and would be the highest level since 2016’s 13.1 percent expansion.

The National quotes the report as saying:

“Higher oil prices and output, as well as an expected increase in investment spending because of the improved security situation, have bolstered Iraq’s economic outlook … However, oil price volatility and potential further social unrest that could weaken Iraq’s economic infrastructure, as well as Iraq’s vulnerability to environmental risks, exacerbated by outdated infrastructure are continued risks to growth.”

More here

[In April, Fitch predicted 4.5 percent growth for 2019. – Ed.]

(Source: The National)

On August 1, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the 2017 Article IV consultation with Iraq.

Iraq is facing a double shock arising from the conflict with ISIS and the plunge in oil prices.

In 2016, real GDP increased by 11 percent owing to a 25 percent increase in oil production, which was little affected by the conflict with ISIS. This year, economic activity is expected to remain muted due to a 1.5 percent contraction in oil production owing to the OPEC + agreement to reduce oil production and only a modest recovery of the non-oil sector.

The decline in oil prices has driven the decline of Iraq’s international reserves from $54 billion at end-2015 to $45 billion at end-2016. Fiscal pressures are ongoing, with the government deficit increasing from 12 percent of GDP in 2015 to 14 percent in 2016 despite the ongoing fiscal consolidation, due to weaker oil prices and rising humanitarian and security spending.

The authorities have appropriately maintained the exchange rate peg. The simplification of documentation requirements implemented by the Central Bank of Iraq led to a decline in the parallel market spread to 6 percent in June 2017.

Medium-term growth prospects are positive. Growth will be driven by the projected moderate increase in oil production and the rebound in non-oil growth supported by the expected improvement in security and implementation of structural reform. Risks remain very high, however, arising primarily from volatile security, political tensions, and poor policy implementation.

The Fund is supporting Iraq through a three-year Stand-By Arrangement in the amount of SDR 3.831 million ($5.380 billion), equivalent to 230 percent of quota.

Full statement here.

30-page report can be downloaded here.

(Source: IMF)

By John Lee.

The International Monetary Fund (IMF) has predicted average growth of 3.1 percent annually in Iraq’s non-oil real GDP until the end of 2022.

This compares to an average fall of 7.2 percent per annum from 2014 to 2016, following the insurgency by the Islamic State group (IS, ISIS, ISIL, Daesh).

It also forecasts a steady fall in government debt as a percentage of GDP, and an improving trade balance, but makes no prediction for the exchange rate of the Iraqi dinar to the US dollar.

The full data table can be viewed here.

(Source: IMF)

By John Lee.

The International Monetary Fund (IMF) has revised down its forecast GDP growth for Iraq from 0.5 per cent to a contraction of 3.1 per cent this year, due to the oil production cuts agreed within OPEC.

Forecasts for 2018 and 2019 are 2.6 percent and 1.6 percent growth respectively.

Consumer price inflation is expected to run at a steady 2 percent per annum over the coming three years.

(Sources: IMF, The National)