Gulf News: the Iraqi economy is threatened by the collapse of its dependence on oil revenues

Gulf News: the Iraqi economy is threatened by the collapse of its dependence on oil revenues

Created on Tuesday, 26 November 2013 15: 56 |

Abu Dhabi/agencies

Iraq continues to expand its oil resources, but diversify the economy towards greater is necessary, as the analysis of the National Bank of QatarQNBThe analysis, published by the newspaper Gulf News UAE-speaking English, in the wake of the Iraq war, the expansion of oil production in Iraq, which produced a rise in GDP of $ 1,750 in 2005 to more than $ 6,300 in 2012 despite a difficult social context.

The Bank said that "However, the economy suffered from weak builders, such as small non-oil sector, a dominant public sector involvement in all areas of the economy and business environment lags behind". The Iraqi economy is primarily driven by developments in the oil sector, growth is expected to remain strong in the short term.

However, there are risks to the macroeconomic prospects such as further social instability and weak policy implementation. These risks can translate to a decline in oil revenues, which speeds up the financial position and the possibility of rising inflation. And Iraq's macroeconomic performance over the past few years a sound began to stimulate oil production. In the year 2012, the production rate of 3 million and 100,000 barrels per day, its highest level in more than 30 years.

And the acceleration of real GDP growth at an average rate of 6.4 percent, reflecting "the increasing oil production and high oil prices."

However, the high economic growth based on expansion of the oil sector may not be enough to ensure its continued prosperity. The lack of diversification of the economy so this time makes the Iraqi economy sensitive to fluctuations in world oil prices could undermine macroeconomic stability. The diversification of the economy can be a challenge to the Iraqi Government in creating employment opportunities and income-generating opportunities, both for the majority of the population.

The IMF engaged in supporting the Government's economic reform programme, medium range, thus helping the country improve fiscal sustainability and reducing their vulnerability to sudden drops in oil revenues. And Iraq still faces the challenges of development, despite the recent surge in economic growth. Indeed, there is a need to rebuild the infrastructure and institutions, a task more difficult, the possibility of social instability. Moreover, the impact of war and economic sanctions, all of which contributed to the deterioration of social indicators in the past few years.

For example, the infant mortality rate is among the worst in the Middle East and North Africa region. Moreover, school attendance rates have decreased over the past decade as a result of the low quality of education, low return to education. Between 2007 and 2012, lower consumption among which constitute 40% of the population in terms of income grew by 1.1 percent per year, which is lower than the average growth of consumption in the whole population (1.8 percent), indicating that income distribution has become more skewed.

And Qatar National Bank Group expects,QNB, To increase real GDP growth in Iraq's future to 6.3 percent in 2014, with growing oil production along with a rapid expansion in government services and commerce.

In addition to this, the investment will grow strongly in several significant oil fields boosts momentum of infrastructure development. However, the challenges of social context and external shocks and economic infrastructure represent risks to the short-term economic Outlook in Iraq. The Bank said that "over the medium term, the challenge for Iraq's economy remains in the development of the non-oil sector, which can provide a resource for economic diversification, higher living standards and better social conditions for the people."

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