The government is facing the challenge of maintaining macroeconomic stability, undertaking structural reforms to improve the delivery of public services, reconstructing core physical infrastructure and assisting the 3.4 million people displaced by the conflict.
Private consumption and investment remain subdued due to an unstable security and political situation and a poor business environment. The non-oil economy contracted by almost 14 percent in 2015 following a 5 percent fall in 2014. After slowing at 0.1 percent in 2014, Iraq’s economy grew by 2.9 percent in 2015 on the back of about 19 percent increase in oil production. Growth in 2016 is expected to further increase to 4.8 percent, sustained by an increase in oil production, but non-oil GDP is expected to contract by 8.2 percent, due to low demand driven by continued fiscal consolidation. Inflation rate is expected to remain low at 2 percent in 2016, with the government subsidizing electricity, food and fuel, but is likely underestimated in ISIS-occupied areas.
Iraq has one of the lowest employment-to-population ratios in the region, even among men, and the 2014 crisis has led to an estimated reduction in employment by 800,000 people. The Public Distribution System provides the only safety net for the vast majority of the poor, and is currently stretched to its limits. Many IDPs received a one-time cash grant of ID 1 million per month in 2015, but the 2.8 million new poor are left largely uncovered by any public safety net. However, Iraq in April 2016 launched a new poverty targeting program aimed at reforming the social security network toward improving its targeting efficiency.
Last Updated: Oct 01, 2016