IMF: Iraq's GDP to shrink by 11%

Shafaq News / The International Monetary Fund (IMF) predicted a decline of 11% in the gross domestic product (GDP) in Iraq, indicating that achieving permanent and comprehensive growth amid huge challenges will require large-scale structural reforms.

In a report seen by Shafaq News Agency, IMF said, "COVID-19 pandemic and the sharp drop in oil prices and production have exacerbated the economic vulnerabilities in Iraq," indicating, "true GDP growth is expected to contract this year by 11% amidst a sharp widening of financial and external imbalances, which reflects the contraction of oil production and the interruption of non-oil economic activity."

IMF report noted, "the sharp decline in oil revenues is expected to expand the fiscal deficit and the external current account to 20 and 16% of GDP, respectively."

"There is a need for a comprehensive package of short-term economic policies based on a reliable financial strategy to overcome the health crisis, ensure economic stability, and protect the vulnerable groups," it continued.

"Achieving lasting and comprehensive growth amid huge challenges will require wide-ranging structural reforms aimed at strengthening public finances, improving governance, reforming the electricity sector, promoting private sector development, and ensuring the stability of the financial sector", the report added.

"The financial efforts in the 2021 budget should target the main areas of financial weakness, especially reversing the unsustainable expansion of wage and pension bills, reducing ineffective energy subsidies, and increasing non-oil revenues," stressing, "protecting vulnerable groups will be of utmost importance and require strengthening Significantly targeted cash transfers and expansion of their coverage, as well as better targeting of other parts of the social safety net."

Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), relies heavily on oil revenues to cover 90% of government expenditure, including $5 billion spent on monthly salaries for public sector employees.