World Bank warns Iraq is ill-equipped to manage a multi-faceted crisis
Iraq’s economic outlook has markedly worsened over the past six months, with GDP growth projected to contract by 9.7% in 2020, down from a positive growth of 4.4% in 2019, according to the World Bank's Spring 2020 edition of the Iraq Economic Monitor. It would make it the country’s worst annual performance since 2003.
The report, called Navigating the Perfect Storm (Redux), discusses the recent economic and policy developments and highlights some of the main macroeconomic policy challenges facing the country.
It finds that Iraq’s pre-existing conditions going into this crisis limit its ability to manage and mitigate the socio-economic impact resulting from low oil prices, reduced oil production quotas and disruptions due to the COVID 19 lockdown measures. Iraq’s highly oil-dependent and state-owned economy impedes the creation of the needed private sector jobs for a predominantly young population.
The unsustainable stimulus package introduced since last October - including a rising public sector employment, lower retirement age, and various transfers - coupled with weaker oil revenues are expected to have detrimental fiscal effects. In case oil prices stabilize in the low-30s and no reform measures are taken, the budget deficit would exceed 29 percent of GDP in 2020 and gross financing needs would reach $67 billion (over 39% of GDP).
Under this situation, financing options might be limited.
