The International Monetary Fund (IMF) has said that Iraq's economy is facing considerable headwinds, with non-oil sector growth slowing from 13.8 percent in 2023 to an estimated 2.5 percent in 2024, impacted by reduced public investment, a weaker trade balance, and financing constraints that led to the accumulation of arrears.Real GDP growth is projected at 3.1 percent for 2025, with inflation of 2.9 percent.The IMF has warned that Iraq's large fiscal expansion in recent years has left the economy highly vulnerable, especially as global oil prices decline. The required oil price to balance the budget has risen from $54 in 2020 to around $84 in 2024. The IMF projects that financing constraints, lower investment, and limited growth prospects will persist, placing additional stress on public finances.Key recommendations to stabilise Iraq's economy include:A substantial fiscal adjustment to mitigate risks and stabilise public debt.Reviewing spending plans for 2025, postponing non-essential expenditures, and implementing public sector wage reforms.Increasing non-oil revenues through higher excise taxes, customs duties, and personal income tax reforms.Introducing a general sales tax (VAT) and implementing a comprehensive public pension reform.On the revenue side, the IMF suggests improving tax administration and focusing on customs duties, while on the expenditure side, it calls for reforming public sector hiring practices and reducing unnecessary spending.In addition, the IMF stresses the importance of supporting infrastructure projects that foster economic diversification, particularly in transportation, trade, electricity, and energy sectors. Reforming the electricity sector and expanding natural gas development are highlighted as crucial for long-term economic growth and energy security.The IMF also recommended improving Iraq's financial system by continuing reforms to state-owned banks and exploring options to strengthen the private banking sector. Further efforts to combat money laundering and terrorism financing are also critical.In the medium term, structural reforms across the labour market, business regulations, and governance are vital to unlocking Iraq's economic growth potential. Enhancing labour force participation, particularly among women, and tackling bureaucratic obstacles are seen as key drivers of non-oil GDP growth.Efforts to reduce corruption and strengthen governance, particularly within state-owned enterprises, are central to building investor confidence and ensuring the sustainability of Iraq's reforms.However, significant challenges remain due to ongoing data deficiencies, which hinder the IMF's ability to fully assess Iraq's economic situation and provide effective policy recommendations. (ICE AMMAN)

Fonte notizia: Stampa Locale