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Iraq Country Risk Report Q2 2018

Iraq Country Risk Report Q2 2018

Executive Summary

Core Views

Political risk will remain elevated over the coming quarters, especially in the run-up to the 2018 elections planned for May, amid the highly militarised nature of the Iraqi society, grievances among religious and ethnic minorities, intra-Shi'a tensions and external powers vying for influence.
Real GDP growth will pick up in 2018, reflecting a brightening outlook for the non-oil economy, benefiting from confidence gains associated with higher oil prices and efforts to rebuild the country's damaged infrastructure network. However, weak growth in oil production, given the OPEC-stipulated production cuts, and elevated political risk will continue to weigh on the economic outlook, underpinning our view for only modest growth over the coming years.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Gradual Recovery On Export Uptick And Reconstruction
The Iraqi economy will recover in 2018, as compliance with the OPEC-stipulated oil production cuts slips in the second half of the
year and reconstruction drives investment in to the country. That said, structural challenges will keep growth rates tepid by historical standards,
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Iraq's budget shortfalls wil l decline over the coming years, on the back of rising oil revenues and government efforts to contain
the public sector salary bill ’ a move encouraged by the IMF. That said, the pace of consolidation will be limited by rising capital
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: BREAKDOWN OF REVENUES AND EXPENDITURE IN 2015
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
External Trade And Investment Outlook
C/A Surplus Moderating In 2018 On Strong Import Demand
Iraq's current account surplus will shrink modestly in 2018 as import demand surges on the back of a reopening of trade routes and the
need for capital goods to rebuild ruined infrastructure. Beyond 2018, current account surpluses will widen due to rising oil exports which,
coupled with an uptick in foreign direct investment, will enable foreign reserves to return to growth
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: BREAKDOWN OF IMPORTS IN 2016
TABLE: BREAKDOWN OF EXPORTS IN 2016
Chapter 2: 10-Year Forecast
The Iraqi Economy to 2027
Reconstruction And Oil Set To Be The Lifeblood Of The Economy
Iraq's potential as a regional economic outperformer has faded as a result of elevated political instability, and we project real GDP
expanding by an annual average of 3.9% over the 2018-2027 period. The oil and gas sector, and the reconstruction of the country's
infrastructure, will be the lifeblood of the economy over this time frame despite sluggish oil prices
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics l
2018 Elections A Litmus Test For Political Stability
Several political challenges will resurface in the run-up of the 2018 elections in Iraq, including ethnic and sectarian tensions, the role
of current Prime Minister Haider al-Abadi would leave scope for national reconciliation and greater political stability, the election of a
more pro-Iran candidate, such as former Prime Minister Nouri Al-Maliki could fuel instability
TABLE: POLITICAL OVERVIEW
TABLE: POPULAR MOBILISATION UNITS ’ SIMPLIFIED OVERVIEW OF MAIN FACTIONS AND CHARACTERISTICS
Domestic Politics Il
Iraqi Kurdistan: Political And Economic Impasse Ahead
The Kurdistan Regional Government (KRG) will continue to face numerous challenges in the years ahead, as the post-referendum
particular, Erbil is unlikely to obtain a favourable budget deal with Baghdad following the latter's military offensive, which will weigh on its
Long-Term Political Outlook
Risks Of State Collapse: Scenarios Assessed
Iraq will maintain formal unity within a more fragile federalised state over the coming decade, but risks that the country will return to full-
blown sectarian civil war are high. A number of risks are likely to resurface as the threat from IS abates
TABLE: LONG-TERM SCENARIOS
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
TABLE: MAIN ACTIVE TERRORIST GROUPS IN IRAQ
TABLE: POLITICAL VIOLENCE RISK
TABLE: MAJOR CONFLICT FLASHPOINTS
TABLE: BUSINESS RESPONSE TO CONFLICT RISK
Transport Network
TABLE: ROAD RISKS
TABLE: RAIL RISKS
TABLE: PORTS AND INLAND WATERWAY RISKS
TABLE: AIR TRANSPORT RISKS
Chapter 5: BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES ’ REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS ’ REAL GDP GROWTH, % y-o-y

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