First Published: 2015-09-21

Strong growth of the Iraqi economy inhibited by security disturbances and fluctuations in the global market

Excessive dependence on oil and the lack of diversification of income sources make Iraq like other oil-producing countries vulnerable to financial shocks.

Cairo - expected Moody's credit rating Monday, to increase Iraq's oil production at a rate of 10 percent annually to reach about 5 million barrels a day by 2019, in conjunction with the expectations of a recovery of the growth of other sectors outside the oil sector from 2016 onwards. This would help to raise real GDP growth rate of about 8 percent per year between 2016 and 2019.

The agency noted in a statement, that the Iraqi economy suffers from a lack of diversification, where oil accounts for about 50 percent of GDP and about 100 percent of exports, as the public sector dominated the non-oil sector, while constitute manufacturing and construction about 10 percent of GDP only in 2014.

And decreased real GDP in Iraq by about 2.1 percent in 2014, driven by a sharp contraction in the non-oil growth, while oil production has continued to grow by about 4.5 percent.

Oil revenues have fallen because of the wave of low oil prices by more than 50 percent since June 2014.

Oil accounts for about 90 percent of total revenue, making Iraq on the list of countries most affected prices of turmoil in global markets.

Experts say, that over-reliance on oil as a key resource to feed the budget and to cover overhead, the oil-producing countries significant economic shocks, and severe pressure on their balance sheets, in the absence of other alternative sources, with the exception of some of the major Gulf oil-producing countries such as Saudi Arabia and the UAE, where enjoy a high-powered to absorb shock Mrakmthma prices thanks to the huge financial reserves over the past years, but the Emirates have also been proactive in diversifying its economy outside the oil sector since hired a significant investment for the development of the industrial sector and also the tourism sector and transport.

Moody's predicted to lead the sharp decline in oil prices, a decline of Iraq's oil revenues by about 35 percent in 2015, to backfire on the budget, which is expected to register an increase in the deficit by about 18 percent of gross domestic product.

Despite expectations of higher Iraqi oil exports in 2016, the fiscal deficit will remain at a level of 15 percent of gross domestic product.

According to Moody's, it said it would finance this deficit to raise the government's debt ratio to about 79 percent of GDP by the end of 2016.

The Agency expects that the declining ratio of government debt to Iraq at a later time, to less than 70 percent in 2019, if oil production and prices rose.

But he noted that the lack of diversification of sources of income and dependence on oil revenues, almost entirely Iraqi policy makes the economy vulnerable to fluctuations in oil prices.

According to statistical review issued by BBC Worldwide has the situation of energy in the world for 2015, which amounted to Iraq's proven oil reserves of about 150 billion barrels in 2014, accounting for about 8.8 percent of the total global reserves to occupy it ranked fifth in the world.

Moody's said, they were given temporary rated bonds that the Iraqi government decided issued in dollars, which means a high degree of risk, and look stable outlook.

Iraq plans to issue international bonds by about $ 6 billion, for the first time in 9 years, to finance the budget deficit, due to falling oil prices and the war against al-extremist Islamic state.

Analysts said expectations of the Iraqi economy, the growth of the agency from 2016 to 2019 by about 8 percent, look optimistic compared with current indicators gathered that security disturbances and fluctuations in oil prices, the most important factors is stimulating growth.