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EI: Iraq's economy might not recover in 2022

Category: Economy

Date: 2021-10-07T09:38:51+0000
EI: Iraq's economy might not recover in 2022

Shafaq News/ Despite high prospects for economic recovery for the Middle East in 2022, crisis countries, including Iraq, remain at doubt, according to a report by the Economist Intelligence. The British economic monitor said that Iraq might not be able to compensate for the losses incurred during the COVID-19 pandemic.

The EI report presents its expectations for the economic and financial conditions in the Middle East for the next year 2022. It dealt with a number of main areas that will be closely monitored by local and global commercial and investment interests, pointing out that the Middle East will remain a very complex place for the interests of However, it will remain a powerfully attractive place for these interests to become active and invest in it. 

The article took into account the lack of equivalence among the countries of the region in the field of combating the Corona virus and its repercussions on the investment climate in the region. While the oil-rich countries in the Gulf Cooperation Council recorded high rates of vaccination for their citizens (up to 70 percent), most countries in the region still suffer from the lack of sufficient vaccines on the one hand, and the slowness in their administration on the other hand. Wealthy Gulf states such as the United Arab Emirates, Qatar, Bahrain, Saudi Arabia and Kuwait will lead the way by fully vaccinating at least 70 percent of their population by the time a new year comes. Although Oman, Jordan and Egypt have been slow, they could achieve the same level of universal vaccination during 2022.

Despite the uncertainty caused by this disparity, the article presents optimistic expectations with some reservations for the path of financing and investment in the region, especially in the Gulf Cooperation Council countries. At the same time, the article warned that abandoning countries in crisis in their confrontation with Corona would help prolong the pandemic in the region and exacerbate other problems such as armed conflicts, water and food insecurity and social grievances.

The article expected an increase in the momentum of economic recovery in the coming year, which will enable a good number of countries in the region to compensate for the losses they incurred due to the pandemic, with the exception of crisis countries such as Iraq, Lebanon, Syria, Palestine and Yemen. The recovery of oil and gas prices will play a key role in stimulating recovery, with expectations that the average of these prices will reach about $70 a barrel, which will ease budget pressures for oil-producing and exporting countries and help stimulate investments. In addition to this, the easing of closures and travel restrictions, which will stimulate non-energy business activity, such as travel and tourism, which may be the main beneficiaries of this development. But the great threat to this recovery comes from the possible developments of the Corona virus and the possibility of the emergence of new strains of it. 

strong start

The article sees that the crisis that the raw materials markets witnessed, specifically the energy markets, as a result of the Corona pandemic, was fortunately shorter than the time taken by the global financial crisis in 2008-2009 and the crisis of low oil prices in 2014-2015. As a result of strong demand and high oil prices in the wake of the pandemic. With the agreement of the OPEC + group, which includes members of the organization and other producing countries, to adhere to a unified collective strategy for its oil production, the article expected that the average price of a barrel of Brent oil would reach $71 next year. He considered that this price is in the interest of the producers because it will allow most of them to improve their budget conditions without restricting the demand for oil or limiting their economic growth.

The “Economist Intelligence” expected that this situation will positively reflect on corporate revenues and stock prices in the oil-producing countries, and thus lead to an increase in public and private sector investments in the field of energy and strategies to diversify the economy of these countries. 2022 is likely to be a boom year for exporters of raw materials in the region and for international traders and investors working in the field of natural resources. She added that the prospects are now better than they have been in decades for oil-dependent economies, most of which will look to achieve maximum revenues from relatively higher oil and gas prices, which will help them finance plans for economic diversification and energy transition.

Display chain glitch

The Economist Intelligence expected that the supply chain would continue to face difficulties as a result of the disruption that afflicted it during the pandemic, which means that economic activities in the Middle East will continue to be affected by this problem.

She added that the over-reliance on Asian suppliers and customers, especially the Chinese, was already a major source of concern. Companies in the Middle East may look to shorten supply chains and refocus on local production where possible, although their options will be limited due to constraints on local production skills, capacity, availability of financing for investments, willingness to invest, and the need to maintain close relationships with old and new suppliers and market customers. Asian, European and American major. More importantly, different countries in the region represent key starting points for China’s Belt and Road Initiative and may be major beneficiaries of the foreign direct investment and attractive global trade flows associated with this project.

Although China will remain a major consumer of energy resources in the region, the shortage of these resources and their high prices, in addition to the lack of the carrying capacity of shipping means and the high costs of transportation will pose major challenges. Severe pressures will remain on global transport with restrictions on air and sea freight, which will be close to its maximum capacity next year, with the continued rise in transport prices. There is an increase in demand for maritime transport with no expected increase in capacity until 2023, and at the same time, air transport is not expected to return to its pre-pandemic levels due to restrictions on travelers and reduced flights. The Economist indicated that price pressures, volatility and uncertainty will continue and will require careful management in the coming year by companies operating in the Middle East.

living security

The Information Unit sees rising temperatures, shortages of fresh water and the threat of food insecurity as a major challenge for the countries of the Middle East, and these problems will be exacerbated by climate change and raises questions about how to manage these cross-border risks.

She pointed to the slow collective progress being made in this area by the governments of the region, which will come under increasing pressure to implement mitigation and sustainability strategies, which in turn will require greater regional and international cooperation. The year 2021 witnessed a record rise in temperatures and severe weather, with the region expected to be more vulnerable to negative climate impacts.

She pointed out that the region, especially Saudi Arabia and the UAE, has a number of planned projects in the field of water management and renewable energy. She expected that the main regional powers, led by Saudi Arabia and the UAE, will seek to occupy a stronger global position and regional leadership, with the world rushing towards reducing carbon emissions in the wake of the United Nations Conference on Climate Change, which was held this year in Glasgow, Scotland. This raises hopes of supporting new investments in areas such as the circular carbon economy, renewable energy and economic diversification away from energy.

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