Rebuilding the destroyed Al Shifaa Hospital in Mosul

Economic situation Still great need for international assistance

Iraq is deeply mired in an economic crisis. The global market price for oil, which has fallen considerably in recent months, and the COVID-19 pandemic have made the situation even worse: in 2020, Iraq’s gross domestic product shrank by more than ten per cent.

Revenues from the sale of oil and natural gas, which make up more than 90 per cent of Iraq’s budget revenues, have fallen by 50 per cent. It is estimated that almost a third of the population is now living below the poverty line.

Experts anticipate an economic recovery starting in 2021. However, this will require growing demand for oil, a successful strategy to fight the pandemic and structural reforms in connection with public finances, the climate for doing business and the labour market, infrastructure, agriculture and social protection. The Iraqi government has put forward comprehensive reform plans aimed at achieving all of this.

However, the challenges facing Iraq remain huge: The violent hostilities of the past decades have left infrastructure in tatters, water and electricity shortages are a frequent occurrence.

Disputes about the distribution of revenues from the oil industry and widespread corruption have meant that many Iraqis receive no benefit from oil revenues. This industry only provides a few jobs. Since the global economy is increasingly turning its back on oil, as part of a global transformation of energy systems, it is furthermore likely that revenues from the oil sector are going to fall.

Economic diversification and a better climate for doing business are therefore urgently needed in order to create employment opportunities for the mostly young Iraqis, who are now flooding onto the labour market. According to estimates by the World Bank, in 2020 unemployment was almost 14 per cent.