2013-03-11 12:19:55 - Recently published research from Business Monitor International, "Iraq Business Forecast Report Q2 2013", is now available at Fast Market Research

Core Views

Despite the formation of a government in December 2010, we expect political progress to remain slow and stability fragile. A broken power-sharing agreement and persistent sectarian tensions present key risks.

The Iraqi economy will be among the fastest growing in the world over the coming five years, driven by an aggressive increase in oil production and the start of large-scale infrastructure projects.

Major Forecast Changes

We have revised up our forecasts for real GDP growth and project the economy to expand 11.5% in 2013, from a previous forecast of 10.3%. That said, we reaffirm our view that, with political instability increasing, risks to the economic outlook remain to the downside.


Full Report Details at
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Key Risks

To Outlook

Terrorist attacks on oil infrastructure or acts of political protest present downside risks to our growth forecasts.

A breakdown of the coalition government could lead to a period of pronounced instability and slower growth.

Partial Table of Contents:

Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
KRG-Baghdad Tensions: Too Much At Stake To Risk Conflict
- Although recent tensions between the Iraqi central government and Kurdistan Regional Government (KRG) cannot be underestimated, we believe both sides recognise there is too much at stake to escalate the military stand-off. That said, Baghdad-KRG tensions will not fade away, and they pose a threat to Iraq's long-term unity, especially if Syria's civil war spills over into Iraq.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Multiple Challenges To Stability Over The Coming Decade
- Iraq faces multiple challenges to its stability over the coming decade, and we do not preclude a return to authoritarian rule, renewed sectarian conflict or the break-up of the state. The key to maintaining stability is ensuring that Iraq's separate ethnic groups' interests are protected by the federal government. Even if Iraq avoids these negative scenarios, the country is likely to remain politically fragmented for the foreseeable future, although this would not necessarily preclude an economic revival.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth Accelerating In 2013
- We forecast Iraq's economy to expand 11.5% and 14.9% in real terms in 2013 and 2014 respectively, mainly as a result of strong growth in oil exports. That said, given increasing political instability, risks to the economic outlook lie mainly to the downside.
TABLE: ECONOMIC ACTIVITY
Fiscal Policy
Low Execution Rates Slowing Development
- We project a 3.5% and 6.0% of GDP surplus for Iraq's fiscal account in 2013 and 2014 respectively. That said, given low budget execution rates for capital spending, regional development will remain uneven, ensuring that risks of civil unrest remain elevated.
TABLE: FISCAL POLICY
Balance Of Payments
Prospects For FDI Remain Bright
- We forecast Iraq's current account to remain in surplus in 2013 and 2014, at 9.1% and 10.8% of GDP respectively. While we remain relatively optimistic regarding foreign direct investment inflows in 2013, risks for investors will remain elevated as a result of increasing political instability.
TABLE: CURRENT ACCOUNT
Monetary Policy
Inflation: Downtrend To Reverse
- We project consumer price inflation in Iraq to average 6.3 % and 6.0% in 2013 and 2014 respectively, compared with 6.2% in 2012. Food and housing prices will remain elevated, while aggregate demand will expand as a result of salary hikes in the public sector.
TABLE: INFLATION
Regional: Sovereign Risk Ratings
The Calm Before The Storm?
TABLE: MENA - EVOLUTION OF ABILITY TO PAY
TABLE: MENA - EVOLUTION OF WILLINGNESS TO PAY
Regional Outlook
Subsidy Reform: Is The Time Nigh?
- With fiscal and current account deficits in the Middle East and North Africa's net oil importers continuing to expand, the urgency of pushing ahead with broad economic reform programmes is gradually increasing. At the same time, with elections approaching and governments hesitant about provoking public unrest, the willingness to pursue such measures is minimal. Below, we assess the likelihood of governments across the region pursuing one of the most urgent measures - namely energy subsidy reform - before more acute economic crises materialise.
TABLE: MENA - KEY ECONOMIC INDICATORS
TABLE: MENA - KEY VARIABLES IN DETERMINING PROSPECTS FOR REFORM
Chapter 3: 10-Year Forecast
The Iraqi Economy To 2022
Continued Growth Dependent On Maintaining Stability
- Our 10-year macroeconomic forecasts are based on the expectation that Iraq will become an increasingly stable polity, setting the foundation for average real GDP growth of 8.0% between 2013 and 2022. The oil and gas sector will continue to be the lifeblood of the economy over this time frame.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions

Full Table of Contents is available at:
-- www.fastmr.com/catalog/product.aspx?productid=552232&dt=t

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