Iraq Economic Outlook
Iraq has likely seen meager GDP growth so far this year, with the economy operating at two different speeds. On one side, OPEC+ quota restrictions and the ongoing closure of an oil pipeline to Turkey are hampering the energy sector; oil output fell year on year for the seventh straight month in October. On the other hand, the non-oil economy should be performing fairly well despite the hike in the Central Bank’s policy rate and restrictions on commercial banks’ access to dollars. Agricultural activity likely benefited early in 2023 from a good rainy season. Moreover, construction activity, investment and private consumption should be getting a boost from relative political calm and greater fiscal spending following the approval of the expansionary 2023–2025 budget in June.
Inflation rose to 3.7% in August (July: 3.5%) and could rise further later in 2023 due to a weak parallel-market dinar, the expansionary budget and higher energy prices. In 2024, inflation is forecast to average slightly below its August level on lower average commodity prices. Volatility in the parallel FX market and changes to the currency peg are risks in both directions.