The IMF predicts Iraq’s economy will contract by 6.8% due to shipping risks and rising inflation.
The International Monetary Fund (IMF) predicted on Wednesday that the Iraqi economy will experience a significant contraction during 2026, amid escalating repercussions of the conflict in the Middle East and continued pressure on global energy markets, placing the country among the most affected by the current crisis.
According to the IMF’s estimates, Iraq’s GDP is likely to decline by as much as 6.8% next year, as a result of the disruptions affecting the oil sector, which is the backbone of the Iraqi economy and the state’s main source of revenue.
This decline comes at a time when the region is experiencing instability, especially with the continuation of tensions that have directly affected navigation in the Strait of Hormuz, one of the world’s most important oil shipping lanes, leading to disruption of export operations and increased shipping and insurance costs for oil tankers.
The rise in oil prices to record levels may not be entirely positive for Iraq, as it is accompanied by a rise in import costs and inflationary pressures, which is reflected in the prices of goods and services within the country and increases the living burdens on citizens.
In the same context, the Fund warned that a longer conflict could push oil prices above $110 a barrel, which would make controlling inflation more difficult and lead to tighter monetary policies globally, negatively impacting developing economies, including Iraq.
According to the IMF data, the effects will not be limited to Iraq alone, as the GDP of a number of countries in the region is expected to decline, including Qatar by 8.6%, Iran by 6.1%, Kuwait by 0.6%, and Bahrain by 0.5%, due to the repercussions of the conflict and rising energy costs.
If these conditions persist, Iraq may face a double pressure of fluctuating oil revenues on the one hand, and increased government spending to address the repercussions of the crisis on the other, which may affect the country’s financial and economic stability.
Shafaq.com