Business Monitor International revised downward Iraq's real GDP growth to 10.5% in 2013 and 10.7% in 2014, from previous forecasts of 11.2% and 14.5%, respectively, due to lower oil export growth over the coming quarters.
It anticipated that oil exports will remain a key growth driver of the economy, along with private consumption. It expected economic output to average 10.3% between 2013 and 2017, making Iraq the fastest growing economy in the MENA region in the covered period. It forecast private consumption to expand by 9.5% in 2013 and 10% in 2014, supported by increases in public-sector salaries and pensions as well as lower inflation rates. It projected the average inflation level at 4% in 2013 relative to 6.2% in 2012, which would stimulate consumption. However, it considered that private consumption growth will be lower than overall economic growth mainly due to a high unemployment rate of around 15%.
It noted that the slow political process and an opaque business environment will continue to hamper the development of the non-oil sector. It expected public spending to rise by 9.5% in 2013 and 9% in 2014 due to elevated spending on education, healthcare and public services.
In parallel, it expected gross fixed capital formation to grow by 9.5% in both 2013 and 2014, as the construction sector would continue to benefit from a large investment plan and an inflated budget. But it noted that the performance of the construction sector will remain below potential due to low completion rates and frequent delays in the approval of projects and in the transfer of funds by the central government. It added that the country's uncertain business environment and elevated security risks could deter private sector developers from fully tapping in the sector's potential. It forecast the construction sector to grow by 8.1% in 2013 and 8% in 2014, and to post an annual average growth of 7.4% during the 2013-17 period, significantly down from an annual expansion rate of 24% between 2008 and 2012.
Business Monitor International