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Iraq Country Risk Report Q4 2018

Iraq Country Risk Report Q4 2018

Political risk will remain elevated over the coming quarters, especially following the May 2018 parliamentary elections which saw the Sa'irun coalition of Muqtada al-Sadr coming first, and the Iran-backed Fatah coalition second, ahead of incumbent Prime Minister Haider al-Abadi.

At the time of writing, a government had yet to be formed and we expect policy-making to be weak due to the fragmented political landscape and low voter turnout. The likely participation of Iran-backed parties in the incoming government risks fuelling sectarian tensions.

Real GDP growth will pick up modestly in 2018, reflecting a brightening outlook for the non-oil economy as the reconstruction process kicks off, and a gradual return to growth for oil exports. We forecast growth to accelerate in 2019.

The fiscal position of the Iraqi government will see some modest improvements over the coming years, as recovering oil prices feed through to higher revenues. We forecast the Iraqi government to post a budget deficit equivalent to 4.3% of GDP in 2018. Government efforts to contain the public sector salary bill will be mitigated by fiscal slippage and elevated reconstruction costs.

The Kurdistan Regional Government (KRG) will continue to struggle politically and economy over the coming years, owing to the consequences of Baghdad's military offensive following the region's independence referendum in September 2017.

Major Forecast Changes

We now forecast real GDP growth of 2.2% in 2018 and 4.7% in 2019, up from 1.5% and 4.5% previously.

We now forecast a budget deficit of 4.3% of GDP in 2018 and 2.9% in 2019, down from 6.6% and 3.2% previously.

Key Risks

Sectarian tensions will remain elevated even with the defeat of IS. Sunni grievances could turn violent again if Baghdad fails to reconstruct the Sunni territory it re-conquered from IS.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Oil Exports And Reconstruction Process To Drive Iraq's Economic Recovery
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Iraqi C/A Surplus To Widen On Oil Price Gains
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: BREAKDOWN OF IMPORTS IN 2016
TABLE: BREAKDOWN OF EXPORTS IN 2016
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Iraqi Inflation To Stay Modest As Dinar Peg Holds
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Iraq Country Risk Q4 2018ContentsFiscal Policy And Public Debt Outlook
Limited Scope For Fiscal Reform Under Incoming Iraqi Government
Structural Fiscal Position
TABLE: BREAKDOWN OF REVENUES AND EXPENDITURE IN 2015
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
10-Year Forecast
The Iraqi Economy to 2027
Reconstruction And Oil Set To Be The Lifeblood Of The Economy
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Political Stability Gains Unlikely Under Incoming Iraqi Government
TABLE: POLITICAL OVERVIEW
TABLE: OVERVIEW OF COALITIONS AND ELECTORAL RESULTS
Long-Term Political Outlook
Risks Of State Collapse - Scenarios Assessed
Global Macro Outlook
Pressure On EM Grows, As Do Divergences
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: IRAQ – MACROECONOMIC DATA & FORECASTS

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