ECONOMIC RECESSION: EROSION OF PURCHASING POWER DEEPENS THE CRISIS IN IRAQI MARKETS
Due to the ongoing economic recession, Iraqi citizens are suffering from the erosion of their purchasing power, which has led them to prefer adopting a conservative spending behavior.
Today, Iraqis are facing an unfamiliar economic scene: houses for sale with no buyers, car showrooms crowded with onlookers but devoid of buying and selling deals, and prices moving faster than people can keep up with them!
Fluctuations in the dollar exchange rate, jumps in the price of gold, delays in salaries, and severe economic and living crises looming on the horizon, all these factors have combined to freeze buying and selling activity in important markets.
Citizens today are adopting a more conservative spending pattern, driven by concerns about economic instability and fluctuating incomes. They are forced to postpone major purchasing decisions, such as buying cars or real estate, or entering into long-term financial commitments.
This trend reflects a prevailing sense of anticipation and caution in the market. There is a preference for holding cash rather than investing it in costly purchases or investments, in anticipation of any unforeseen economic developments.
The Baghdad Provincial Council had attributed the stagnation of the real estate market in the capital to the high amounts of fines and taxes on subdivided houses, indicating during December 2025 that recommendations were nearing completion that included reducing the fine for subdividing houses from five million to 250 or 500 thousand dinars, as well as imposing the tax on the sold area only and not on the entire original plot of land, in an attempt to address this stagnation.
Waiting for the dollar to stabilize
Citizen Abu Ahmed says in a press interview that he put his house up for sale more than four months ago due to financial circumstances, and to this day no serious buyer has come forward. He added in a press interview that everyone who asks about the house backs down when they know the price, or says they are waiting until the dollar prices stabilize.
He points out that in the past, a house would not remain on display for more than a month, but today the market is almost at a standstill.
An ill-advised gamble
Experts attribute this stagnation to the fluctuating exchange rate of the dollar against the Iraqi currency, and the high price of gold, which makes buying and selling real estate and cars an uncalculated gamble.
In this regard, economist Mustafa Faraj says, “There is a direct relationship between the price of gold and the dollar. Gold is a metal priced in dollars, and if the price of the dollar falls, the price of gold rises, and vice versa.”
He then explains that “Iraq is a rentier state and relies heavily on imports. Therefore, it is directly affected by the price of the dollar, especially in the field of cars, which are imported using hard currency,” adding that “the same applies to house prices. The dollar has a significant influence on the Iraqi market.”
He continues, saying that “real estate sales are currently experiencing a recession, which will continue in the coming period,” noting that “the situation of the Iraqi economy is difficult, due to a shortage of financial liquidity, which leads to delays in paying the salaries of state employees.”
According to Faraj, “Many people have resorted to investing in gold in light of the current geopolitical situation in the region. This has led to a surge in demand for gold, which has contributed to its price increase. In addition, there is a lack of trust among citizens in government banks. The fear of keeping money in banks pushes citizens to invest it in gold.”
Paralysis of buying and selling
Real estate office owners and car dealerships also complain of the stagnation and paralysis that has affected their businesses in the past period.
Radwan Al-Yassiri, owner of a car showroom in the Al-Bayaa area of Baghdad, confirms that he and his colleagues are suffering from an almost complete halt in car sales operations, noting in a press interview that “the direct sales area used to witness heavy congestion on Fridays, and the car market would be at its peak activity, but in recent weeks there have been very few sales and purchases.”
He adds that “the decline in car sales and purchases is linked to several factors, including the weak purchasing power of citizens, increased inflation, as well as the high customs duties imposed on car imports, the ban on importing cars that do not conform to specifications, in addition to the fluctuation of dollar exchange rates,” noting that “all these reasons have led to higher car prices, and made citizens hesitant to sell or buy them.”
He notes that “citizens are no longer buying new cars as they used to. Sales have dropped to near zero, and consumers have turned to buying used cars.”
Real estate agents who buy, sell, and rent properties face similar difficulties to those of showroom owners. Abdul Hassan Kadhim, a real estate agent in Baghdad’s Jihad neighborhood, says that the last house sale through his office was more than two months ago.
In a press interview, he explains that his current activity is limited to renting houses and organizing rental contracts, indicating that the fluctuation in the dollar exchange rate and the weakness of purchasing power are behind the stagnation of various sectors at the present time.
Erosion of purchasing power
According to specialists, the current stagnation in buying and selling in the real estate and automotive sectors is not a passing event, but may be a long-term indicator of a decline in the local economy.
Khaled Al-Jabri, head of the “Usul Foundation” for Economic Development, says that “what the economy is witnessing today is not a passing slowdown, but rather an actual contraction in demand, resulting from the erosion of the citizen’s purchasing power due to the delay in salaries, the increase in customs duties, and the stagnation of liquidity in .