Iraq Business Forecast Report Q1 2009

Publication Date	November 2008
Publisher	Business Monitor
Product Type	Report
Pages	61
ISBN Number	not applicable
Product Code	BMI03034

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Summary

Security Gains To Spur On Growth

Iraq's economy is dominated by the oil sector and so falling global prices in the latter half of 2008 present a considerable risk. The impending global slowdown means that we may not see a recovery in prices in the shorttomedium term. Nevertheless, we expect Iraq's postwar economic recovery to continue and growth to hold up strongly, aided in large part by the improving security situation. The central government is becoming more assertive and Iraqi security forces are likely to be responsible for all 18 of the country's provinces by mid2009. The greater stability will result in a considerable surge of foreign investment into the both the oil and nonoil economy over the coming years as Iraq looks to boost oil production and reconstruction, and infrastructure projects gather pace.

We have revised upwards both our shortterm and longterm political risk ratings, on the back of the improved security situation, Iraq's stronger regional profile and the growing confidence of the central government. Civilian fatalities and US troop deaths are at their lowest postSaddam levels, and Iraqi security forces had, at the time of writing, taken over responsibility from the US military for 13 of Iraq's provinces. Nevertheless, Iraq's political risk ratings are still the lowest for all Middle Eastern and North African countries. As regards Iraq's relationship with the United States, we do not expect the election of Barack Obama to the US presidency to result in a rapid diminution of American forces once he assumes office.

Iraq's postwar economic recovery is inextricably tied to its oil sector; despite the abandonment of planned shortterm technical service contracts with international oil companies, the Iraqi government expects to sign longerterm deals in 2009. In light of the oil sector expansion we expect real GDP growth to average 7.4% annually between 2009 and 2013. Falling oil prices have led Baghdad to rein in its planned budget for 2009 but lacking a sustained or dramatic price shock, we expect Iraq to record healthy current account surplus throughout the forecast period. The improved security situation will lay the foundations for robust nonoil growth, and continued monetary easing will encourage greater bank lending, further spurring on economic expansion.

The business environment will continue to improve. Foreign direct investment (FDI) inflows will grow substantially over the coming years, albeit from a very low base. The opening up of the hydrocarbons sector to foreign oil companies will pick up in earnest despite the Iraqi parliament's failure to pass the muchdelayed petroleum law. In addition, the improvements in the security situation have laid the foundations for a surge in nonoil FDI. Indeed, Al Maabar of the UAE recently announced it that it planned to launch a US$10bn mixed use project in Baghdad. On the downside, corruption remains a major problem.

Content

Executive Summary
Security Gains To Spur On Growth
Chapter 1: Political Outlook
- Swot Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Upward Revision To Political Risk Ratings
- The Improving Security Situation, Iraqs Stronger Regional Profile, And The Growing Assertiveness Of The
- Central Government Are All Positive Political Developments
List Of Tables
- Table: Political Overview
- Foreign Policy
- Us Policy Unlikely To Change Significantly
- We Do Not Expect That Us PresidentElect Barack Obama Will Instigate A Rapid Withdrawal Of American Forces
- In Iraq Once He Assumes Office In January 2009, As He Will Be Wary Of Jeopardising Recent Security Gains
- Chapter 2: Economic Outlook
  - Swot Analysis
  - Bmi Economic Risk Ratings
  - Economic Activity
  - Oil Growth To Drive Economic Expansion
  - Real Gdp Will Grow By An Average 7.4% Annually Over The Next Five Years On The Back Of Increasing Oil Output
  - And Strong Growth In The NonOil Sector
List Of Tables
- Table: Economic Activity
- Exchange Rate Outlook
- Dinar: Crawling Appreciation To Continue
- Falling Oil Prices Mean There Is Less Upside Pressure On The Dinar, But Even So, We Expect The Central Bank Of
- Iraq To Maintain Its Steadily Appreciatory Crawling Peg Exchange Rate
List Of Tables
- Table: Exchange Rate Policy
- Monetary Policy
- High Loan Growth Expected
- Having Cut Interest Rates By 100bps On November 3 2008, We Expect The Central Bank Of Iraq To Sustain Its
- Monetary Easing Cycle In The Medium Term
List Of Tables
- Table: Monetary Policy
- Balance Of Payments
- Oil Sector Will Drive External Outlook
- We Expect Iraq To Record Healthy Current Account Surpluses Over The Coming Years
List Of Tables
- Table: Balance Of Payments
- Table: Various Oil Price Projections
- Investment Climate
- Fdi Inflows To Soar
- The Improved Security Situation Should Allow Iraq To Attract Increasing Foreign Investment Inflows Over The Coming Years
- Chapter 3: 10 Year Forecast
  - The Iraqi Economy To 2018
  - Greater Political Stability And Solid Growth
  - We Expect That Iraq Will Become An Increasingly Stable Polity, Setting The Foundation For Average Real Gdp
  - Growth Of 5.9% Between 2009 And 2018
List Of Tables
- Table: LongTerm Macroeconomic Forecasts
- Chapter 4: Special Report
  - Why The Us Can Remain World Superpower
  - Wealth Is Shifting East
  - The Uss Current Financial Woes Will Not Necessarily Undermine Its Position As A Global Superpower
List Of Tables
- Table: Geopolitical Power Index
- Chapter 5: Business Environment
  - Swot Analysis
  - Bmi Business Environment Risk Ratings
  - Business Environment Outlook
  - Latest Developments
List Of Tables
- Table: Bmi Business And Operational Risk Ratings
- Table: Bmi Legal Framework Ratings
- Infrastructure
- Market Orientation
List Of Tables
- Table: Middle East & Africa Annual Fdi Inflows
- Table: Bmi Trade Ratings
- Operational Risk
List Of Tables
- Table: Top Export Destinations
- Chapter 6: Bmi Global Assumptions
  - Global
List Of Tables
- Table: Global Assumptions
- United States
- Eurozone
- Japan
- China
- Commodities