Although being torn by war, Iraq is about to become a very tempting destination for foreign investors. World Bank forecast, that the economy of the country will grow by 7.2% this year, which is twice more than the average growth of the country in Middle East. Moreover, the economy growth will continue at value around 5% during the further years. This is driven by the projected ramp-up in oil production, increase in oil-related FDI, structural reforms, implementation of the IMF program, and a lessening of the incremental impact of the ISIS insurgency going forward.
However, Baghdad is facing a very serious obstacles. First are rebels ISIS that devastated much of northern and western Iraq and the government allocate large part from the budget into defending the territories and military operations. The terrorist attacks happens every day and danger continue to stave off foreign investors.
Another serious obstacle in front of the economy growth of Iraq is the continuing low oil prices. The oil price of 30 USD per barrel is a serious problem for a country’s growth. Moreover, as previously the value was over 100 USD per barrel. However, the experts expect Iraq to deal better with the low oil prices than Saudi Arabia, which relies on expensive raw material to support the budget.
Additionally Iraq can attract investors confidence thanks to the loan of 5.4 billion USD, which the International Monetary Fund (IMF) released to the country for treating the poverty and improvement of the economy.
Despite the moderate reduction in military-related spending and the fiscal consolidation measures, the fiscal situation is projected to worsen due to lower oil revenues, with the fiscal deficit expanding from 5.6% points of GDP in 2014 to 20.0% of GDP in 2016 on current policies, though the financing of such a deficit will be challenging. On the external side, the current account deficit is projected to widen from 6.6% of GDP in 2015 to 15.3% of GDP in 2016. Higher-than-projected oil prices would improve both the fiscal and external balances.
According to forecasts the country’s debt will fall below 79% of gross domestic product (GDP) this year. Also the time for making late payments to international oil companies will decrease from 220 days to 120 days.
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