Economic Analysis


Population 41.2 million
GDP per capita 5,021 US$
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major macro economic indicators

  2020 2021 2022 2023 (e) 2024 (f)
GDP growth (%) -15.7 7.7 8.1 3.7 3.1
Inflation (yearly average, %) 0.6 6.0 5.0 6.5 2.0
Budget balance (% GDP) -13.9 -0.4 6.4 -2.6 -5.1
Current account balance (% GDP) -10.9 7.8 11.6 4.4 -2.5
Public debt (% GDP) 84.3 59.2 43.3 47.9 55.0

(e): Estimate (f): Forecast


  • Vast proven and undiscovered oil and gas reserves with low extraction costs
  • Interest from foreign investors in infrastructure (energy, water, transport, etc.)
  • Improved relations with China have led to new agreements in the oil and construction sectors
  • A young and growing population


  • Economy heavily dependent on oil, but large gas deficit
  • No budgetary rules for managing oil and gas revenues
  • Weak electricity and water supplies
  • A largely public and fragile banking system
  • Social and political instability fuelled by Iranian interference, and religious and ethnic divisions
  • Non-targeted social protection and administration employing 38% of the workforce
  • Government housing Sunnis, Kurds and pro-Iranian Shiites is unlikely to correct the slow pace of economic and institutional reform
  • Tensions between the central government and the Kurdistan Regional Government over the redistribution of oil revenues
  • Corruption, institutional weakness, insecurity, divisions

Risk assessment

Economic activity to remain moderate

After the very sharp recession of 2020 prompted by the Covid-19 pandemic, followed by two particularly robust years due to very high hydrocarbon prices, growth eased in 2023 on back of softening oil prices and the temporary halt to Kurdistan's oil exports to Turkey. In 2024, growth is therefore likely to remain modest as a result of OPEC's decision – Iraq is its second-largest producer – to maintain its production cuts, oil prices moderated by a still sluggish global economy and the revaluation of the dinar in February 2023, which weakened the local currency equivalent of exports. Non-oil GDP growth will be driven by investment projects, stimulated by the USD 150 billion budget approved by Parliament in June 2023 for the period 2023-2025. This will enable infrastructure projects to be rolled out, including the reconstruction of Mosul airport that was partly destroyed in 2017 during fighting against Daech, which began in 2022 and is expected to continue into 2024. The large budget will also allow for significant current public spending, such as raising the minimum wage, which will support private consumption. The latter will also be stimulated by the return of inflation to a moderate level due to the easing of global food prices, as well as the revaluation of the dinar, which will limit imported inflation.


Twin deficits on the rise

High hydrocarbon prices fuelled a large current account surplus in 2021 and 2022. Prices will still be high in 2023, although on the wane. The current account will move into deficit in 2024, through the trade balance, due to the fall in oil exports and the increase in the volume of imports to meet the rise in private consumption and the need for capital goods and materials generated by infrastructure projects.
The budget deficit will widen as a result of the expansionary budget voted for the period 2023-2025, which will increase public consumption and investment. It will also be adversely affected by the decline in government revenue from oil (which accounts for around 90% of total revenue), given the less buoyant state of this sector.
The deficits will be financed by drawing on foreign exchange reserves (equivalent to 9.7 months of imports by the end of 2022) and debt. The latter will remain at a sustainable level, alleviated in particular by the revaluation of the Dinar, with 56% of public debt denominated in foreign currencies. However, this composition continues to expose public debt to significant exchange rate risk. As 75% of public debt is held by official creditors, the refinancing risk will remain low.


Relative political stabilisation, but ongoing challenges

The snap Parliamentary elections in October 2021 (won by the coalition led by Moqtada al-Sadr's Shiite Sadrist movement) led to a divided Parliament and a year of negotiations to form a government, on top of high tensions and violence in the country. The unexpected withdrawal of 73 Sadrist deputies (out of a total of 329) in June 2022 enabled the Coordination Framework, the other major Shiite political force backed by Iran, to become the leading party in Parliament, marking the first step towards ending the crisis. This was followed by the appointment of the Shiite Mohammed Shia' Al Sudani as Prime Minister, the election of Abdel Latif Rachid, from the Patriotic Union of Kurdistan, as President of the country (thus ousting the outgoing President), the retention of the Sunni Mohammed al-Halbusi as President of the Council of Representatives, and finally approval of the Prime Minister's government, thus forming a fragile coalition of Shiites, Kurds and Sunnis. However, while Sudani had pledged to organise fresh elections within a year of his appointment, these may not take place until 2024. Despite the relatively calm political scene, the challenges are many. Political violence and social discontent could be exacerbated by the electoral law passed in March 2023, which gives more weight to the major parties to help them obtain a majority and avoid the paralysis of 2021-2022, but at the same time crowds out independent opposition parties. Security interventions by militia, in particular factions of the Popular Mobilisation (some of which are aligned with the Iranian position), during the campaign could also inflame tensions.
In geopolitical terms, the country will attempt to continue the diplomatic rebalancing begun by former Prime Minister Kadhimi, and thus to maintain its equidistant position between its main opposing allies, the US and Saudi Arabia on the one hand, and Iran on the other. This will be facilitated by the agreement reached between Saudi Arabia and Iran in March 2023 after 7 years of diplomatic breakdown. Finally, the country should continue to strengthen its relations with China, both commercially and diplomatically.


Last updated: October 2023

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