Author and researcher: Husein Haidar
Introduction
Iraq is one of the most oil-dependent countries in the world, with oil revenues accounting for more than 99% of exports, 85% of the government’s budget, and 42% of gross domestic product (GDP) over the last decade. The vast majority of state expenses go toward public sector salaries and expenses. Despite possessing a young and dynamic population with over 700,000 new graduates entering the job market every year, 15% of the estimated 44 million population is unemployed and lives in low-income households. Youth unemployment is even higher, with over 35% of youth either unemployed or not in education or training. Even under optimistic scenarios for oil production, continued reliance on oil alone will not generate sufficient jobs to guarantee the welfare of all Iraqis.
The over-reliance on oil has meant that Iraq’s economy has been prone to fiscal fragility and crises, as volatility in oil prices have had significant impacts on state resources. Vulnerability to oil price shocks has diminished efforts to rebuild infrastructure and provide consistent services to citizens, let alone ensuring jobs for young people, who represent over 40% of the population. The impact of COVID-19 on the Iraqi economy is one of the latter examples of the lack of resilience in the Iraqi economy. Iraq’s GDP performance in 2020 was the worst in 20 years, contracting by an estimated 15.7% before recovering to pre-pandemic levels in 2022. The unemployment rate shot up by 10%, exacerbating the impact on internally displaced people, women jobseekers, self-employed and informal workers.
Despite Iraq entering a period of relative stability after the defeat of ISIS, as well as the political unsteadiness and social unrest that followed, Iraq’s oil revenues have failed to translate to wide-ranging efforts to transform non-oil sectors to contribute effectively to the economy, unlike what can be seen in Iraq’s oil-rich neighbors. Beyond the rampant corruption and fragile political alliances underpinning the Iraqi government, oil windfalls during times of strong performance for global oil markets provide the opportunity for the Iraqi government to focus on developing the private sector, which at present plays a small role in the general economic development of Iraq.
The article in Arabic: تنمية القطاع الخاص العراقي.. التحديات والفرص