Country Report Iraq November 2008

Outlook for 2009-10

• The drawdown of US forces from early 2009, and the continued weakness of central authority, may allow militia and insurgent groups to re-establish themselves in some areas, although violence should not return to 2006-07 levels.
• The attempt by the prime minister, Nouri al-Maliki, to boost his authority on the back of a revived Iraqi army will lead to increased friction with the Kurdish parties, exacerbated by growing Kurdish impatience over Kirkuk.
• Iraq's foreign policy will be focused on carving out a more independent role for itselfa task made easier by the start of the US troop withdrawal.
• Despite the lack of a federal hydrocarbons law, the government will persist with efforts to award long-term oilfield development contracts to international companies.
• The fiscal account is likely to fall into deficit from 2009, despite the government's decision to rein in its spending plans, as oil prices decline sharply and expenditure continues to grow.
• We have lowered Iraq's real GDP growth forecast slightly, to around 6% in 2009-10, reflecting the government's decision to reduce fiscal expenditure growth in response to recent sharp falls in oil prices.
• We have revised Iraq's current-account outlook in line with the lowering of our oil price forecasts. The current account is now expected to move from a surplus of over US$15bn in 2008 into an average deficit of US$6.6bn in 2010.

Monthly review

• After long and difficult negotiations, the Iraqi cabinet has approved the Status of Forces Agreement with the US, although parliament still has to give itsassent.
• Responsibility for security has been handed to Iraqi forces in Babil and Wasit provinces, amid a steep drop in violence. However, a spate of bomb attacks in Baghdad on November 10th has highlighted the fragility of these gains.
• The slide in oil prices has led officials to announce that the 2009 federal budget has been cut to US$67bnUS$13bn lower than the original proposal.
• Details have emerged that Iraq's heads of agreement with Royal Dutch Shell, covering the development of Basra's gas reserves, was more extensive than initially believed.
• The Central Bank of Iraq has cut interest rates, in the wake of falling consumer prices and the global economic slowdown.
• Oil production has fallen steeply, reflecting adverse weather conditions and sabotage of the northern pipeline.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;1;49;70
NAICS Code: 52;11;22;72