The International Monetary Fund estimated Iraq's real GDP growth at about 8% last year due to rising oil production and robust non-oil activity. It projected growth to accelerate to 9% in 2013, to be driven by an increase in oil production from nearly 3 million barrels per day in 2012 to 3.3 million b/d this year.
It estimated the inflation rate at 6% in 2012 and anticipated it to slightly decline this year. It also estimated the budget surplus at around 4% of GDP last year, mainly due to higher-than expected oil revenues. It considered that the execution of the 2013 budget should be aligned with available financing, and encouraged authorities to target a budget surplus this year to support the accumulation of adequate fiscal buffers in the Development Fund of Iraq. It estimated Iraq's foreign exchange reserves at $70bn and the assets of the Development Fund for Iraq at $18bn at the end of 2012 due to strong oil proceeds. It called for the strengthening of public financial management, mainly through the gradual elimination of off-budgetary spending and of relying on state-owned bank financing to support public enterprises. It also cautioned from approving additional spending commitments this year.
In parallel, the Fund called on the authorities to address serious medium-term challenges in order to create the conditions for high and sustainable growth. It said that the economy continues to suffer from severe structural weaknesses such as a small nonoil sector, high unemployment rate, public sector dominance of the economy, and a weak business environment. It anticipated the growth of the oil sector to remain elevated over the coming years, but it considered that enhancing non-oil private sector growth requires a long-term government strategy centered on improving the business environment and providing opportunities for the private sector. Further, it encouraged authorities to carefully manage the budget in order to maintain macroeconomic stability, meet the country's large social and investment needs, further accumulate buffers to address oil market volatility, and ensure medium-term fiscal sustainability.
International Monetary Fund – Byblos Bank