The Iraqi Economy

Most Middle East countries suffer from prospects of their failure economically with variations from one country to another. Most of that variation is due to the integrity and capability of their public administrations. Iraq is a clear case of the relative abundance of resources but with substantial inability in allocating them towards the real needs of the economy and citizens, in addition to the great waste due to administration corruption. In the last five years, Iraq has achieved oil revenues only by about US$ 370 billion and more than US$ 400 billion in total revenues. The last five years were years scarce in oil revenues. “The Economist” Intelligence Unit estimates Iraq’s oil revenues in 2019 and 2020 by about US$ 185 billion, or more than US$ 200 billion for their total in two years. Nevertheless, its administrations failed to satisfy the very basic necessities of citizens, such as food, water, electricity, housing, infrastructure, hygiene, and employment, the source of obtaining all the foregoing.

In the latest report of “The Economist Intelligence Unit” -Country Report- on the 7th of October, the Unit estimates stable indicators for the performance of the Iraqi macro-economy. The real growth expected in 2019 is around 3.5% and is 2.8% in 2020, although most of it is achieved due to the rise in oil production capacity. Inflation rates are at 1.1% and 1.5% for the two years, and the deficit of the general budget is -1.3% and -3% of its GDP for the two years. The current account achieves a surplus  of  9.1%  and 6.6% of GDP volume for the two years, and the exchange rate of the Iraqi Dinar is fixed. Even the total external debt estimated at US$ 78.3 billion does not exceed 34% of the nominal GDP value of 2019. Nevertheless, Iraq passed by unfortunate violence in which human casualties fell, in an undue price. And the cause of violence is simply that the beneficiary of those macro indicators is not the public.

The situation of most oil countries fluctuates between the Norwegian model and the Venezuelan model. Norway is one of the best models in the world while Venezuela, the largest oil reserve in the world, is on the verge of becoming a failing state. What made the difference between the two countries is not resources but the ability and integrity of the administration. It is not in the interest of any of the neighboring countries to create a state of instability at its neighbors for a moral humanitarian reason first and because there is always the possibility of its crossing the border. Likewise, stability and success of a neighboring country is also a positive border crossing. The hope is that Iraq will stabilize and prosper.