The IMF said Thursday that on the back of rising oil production and robust non-oil activity, Iraq’s economic growth remained strong at about 8 percent in 2012. They forecast that Iraqi economy would grow around 9% this year helped by surging oil production from just under 3 mbpd in 2012 to 3.3 mbpd in 2013.
In 2012, inflation was contained at 6%, and the IMF projects it to decline slightly this year. On account of strong oil proceeds, CBI reserves reached US$70 billion at the end of 2012, while the Development Fund for Iraq (DFI) rose to US$18 billion.
It’s worth noting that Iraq achieved a budget surplus of about 4% of GDP in 2012, although that’s largely due to higher-than expected oil revenues. But the IMF said that Baghdad needs to do more to support private, non-oil business. Public financial management should be strengthened, notably by phasing out off-budgetary spending practices and reliance on state-owned bank financing to support public enterprises. Approval of additional spending commitments during the fiscal year should also be avoided.
The IMF noted that the economy “continues to suffer from severe structural weaknesses such as a small non-oil sector, high unemployment, public sector dominance, and a weak business environment.”
It suggested that the government needs to formulate a long-term strategy to foster the growth of the non-oil sector, opening more opportunities to private business and providing more room for private banks.