DINAR REVALUATION REPORT: Five Economic Pillars of Iraq in 2024, 8 NOV

 Five Economic Pillars of Iraq in 2024

Iraq, a country rich in natural resources but long affected by conflict and political instability, has been making strides to stabilize and diversify its economy. As of November 7, 2024, the five key economic pillars that define Iraq's status are:

Oil and Gas

Dominant Economic Sector

Oil remains the backbone of Iraq's economy, accounting for over 99% of exports, 85% of the government’s budget, and 42% of gross domestic product (GDP). 6 The sector's dominance exposes the country to macroeconomic volatility, but it also provides a significant revenue stream that has been crucial for recovery efforts.

Recent Developments

In 2021, government revenues surged by 73% year-over-year, driven by higher oil prices averaging $68.3/barrel. 6 These gains have helped turn the overall fiscal balance to a surplus of 5.3% of GDP in 2021, providing a buffer for economic stabilization and development initiatives.

Non-Oil Economy

Diversification Efforts

Despite the dominance of oil, Iraq has been making efforts to diversify its economy. The non-oil sector grew by over 6% in the first nine months of 2021, driven by the services sector as COVID-19 restrictions eased.  6 This growth highlights the potential for non-oil sectors to contribute to economic stability and job creation.

Challenges

However, attempts to diversify the economy and modernize the financial and banking sectors are hampered by political dynamics and corruption. 5 The private sector and foreign direct investment (FDI) remain underdeveloped, and the country struggles to enhance its export capacity, particularly in agriculture.

Labor Market and Social Protection

New National Strategy

Iraq has launched a new national strategy to reduce inequalities in the world of work, emphasizing inclusivity, equal opportunity, and social protection. 3 This strategy aims to create a more equitable and prosperous future by addressing issues such as unemployment, particularly among displaced populations, women, and informal workers.

Unemployment

As of January 2021, Iraq's unemployment rate was more than 10 percentage points higher than its pre-COVID-19 level of 12.7%. 6 The strategy seeks to reduce these high unemployment rates by fostering a more inclusive and equitable labor market.

Humanitarian and Development Needs

Protracted Needs

Iraq still faces significant humanitarian and development needs, including a complex political environment and a volatile security situation. 2 The country hosts over 300,000 refugees and asylum-seekers, primarily from Syria, and has an internally displaced population (IDPs) of 1.14 million. These populations face barriers to return and integration, including insecurity, lack of livelihood opportunities, and damaged housing.

Crisis Response

The Iraq Crisis Response Plan 2024 aims to support the government in developing inclusive strategies for recovery, peacebuilding, and stabilization. 6 The plan targets 670,000 people and requires $144.7 million in funding, highlighting the ongoing need for international support and collaboration.

Digital Media and Community Resilience

Digital Engagement

The Iraq Community Resilience Initiative (ICRI), funded by USAID, aims to support inclusive and stable communities through digital media. 1 With over 31 million digital media users in Iraq, there is a significant opportunity to bring communities together, encourage collaboration, and share positive narratives.

Grassroots Initiatives

Despite the challenges, grassroots initiatives and media activists have emerged, working to tell positive stories and counteract disinformation. 1 ICRI has awarded grants to local media activists and organizations, enabling the establishment and sustainability of credible social media channels.