Iraq: Country Economic Forecast: 05 Dec 2011

Oil output remained close to 2.7m b/d in October and, with a further pick-up likely in the final two months of the year, will rise by about 14% in 2011 overall. And with oil prices up by an average of close to 40% this year, oil revenues are booming, in turn driving heavy state spending. As a result, GDP growth is still seen accelerating sharply to about 10% in 2011 from just 1% in 2010. Further rises in oil output will underpin solid GDP growth in the next few years, but slowing from the 2011 pace as oil prices weaken somewhat. Official projections for oil output have been revised down, with government hoping for 8m b/d by 2017 rather than 12m b/d but even this may prove over-optimistic. State expenditure on major construction and infrastructure projects will remain high, but security concerns â?" as the US completes its troop withdrawal by end-year â?" and low foreign investor confidence will hamper revival of private sector activity. A small current account surplus is expected in 2011 as exports rise by about 45%, driven by higher oil output and the sharp rise in the average world oil price. But an expected 12% drop in oil prices and rising imports of goods and services may see a return to deficit in 2012. Strong oil revenues could also yield a small budget surplus in 2011 as spending falls behind schedule and high oil prices boost revenues more than officially projected. Another small surplus is likely in 2012.