Iraq is facing the challenges of diversification of the economy

Posted: November 21, 2013 in Iraqi Dinar/Politics
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18-11-2013 10:00 AM

Iraq faces the challenge of how to achieve greater economic diversification despite the continued expansion of the exploitation of its oil resources, nor the Iraqi economy is still suffering structural weaknesses, such as the small size of the non-oil sector and the dominance of the public sector at all joints of the economy, and the lack of an enabling environment for doing business.

He predicted «Qatar National Bank Group ‘valuable report’ economic growth to remain strong in the short term, with continued growth by relying mainly on developments in the oil sector. The report also pointed to the «risk to the macroeconomic situation, such as aggravation of social instability and poor implementation of policies, and these risks can lead to reduced oil revenues, and then to a weakening of the financial situation, which could lead to a rise in the levels of acceleration of inflation.

He guessed report rise in GDP of Iraq at constant prices 6.3 percent in the year 2014, with the escalation of the increase in oil production, in addition to accelerating the expansion of government services, trade and construction, as well as increased investing heavily in many of the oil fields and the escalation of the growth momentum in the infrastructure, but «factors such as the challenge of unstable social situation, and external shocks, and the weakness of the economic structure, represent risks to the prospects for the future of Iraq in the short term.

According to the report: «The challenge remains the president of the Iraqi economy in the medium term, the development of its non-oil sector, which could lead to the diversification of the sources of the economy, and raise the standard of living and improve the social conditions of the Iraqi people. The acceleration of oil production in Iraq led to an increase in per capita GDP of 1790 dollars in 2005 to $ 6,300 in 2012, despite the difficulties faced by the country at the social level. He said that the overall performance of the economy of Iraq in recent years was well on the back of the recovery of oil production, «In 2012, oil production reached the highest level in 30 years, and the accelerated growth of GDP at constant prices 6.4 percent on average during the period 2005-2012 in the light of the rise in oil production and prices.

He explained that the high economic growth based on the expansion of the oil sector may not be enough to ensure continuity of prosperity, because the lack of economic diversification, yet makes economic growth for Iraq sensitive to fluctuations in global oil prices, and may lead to damage to macroeconomic stability, and therefore the economic diversification may be a challenge to the Iraqi government in terms of creating new jobs, and in finding income-generating opportunities for the vast majority of the population.

He pointed out that the IMF contributed to the support of the government program of economic reform for the medium term, and thus helped to improve the sustainability of public finances and reduce the sensitivity of the Iraqi economy and influenced by the sudden retreat of oil revenues.


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