Iraq: Structural Reforms Critically Needed to Manage a Multi-Faceted Crisis

[size=44]Iraq: Structural Reforms Critically Needed to Manage a Multi-Faceted Crisis[/size]

MAY 4, 2020










Baghdad, May 4, 2020 – Faced with a combination of acute shocks which the country is ill-prepared to manage, Iraq’s economic outlook has markedly worsened over the past 6 months. 


GDP growth is projected to contract by 9.7 percent in 2020, down from a positive growth of 4.4 percent in 2019, making it the country’s worst annual performance since 2003, according to a new World Bank report released today.  

The Spring 2020 edition of the Iraq Economic Monitor, “Navigating the Perfect Storm (Redux)” discusses the recent economic and policy developments and highlights some of the main macroeconomic policy challenges facing the country.


 The report finds that Iraq’s pre-existing conditions going into this crisis limit its ability to manage and mitigate the socio-economic impact resulting from low oil prices, reduced oil production quotas and disruptions due to the COVID 19 lockdown measures. 


Iraq’s highly oil-dependent and state-owned economy impedes the creation of the needed private sector jobs for a predominantly young population. 


Furthermore, the growing discontent over poor service delivery, rising corruption, and lack of jobs persists and is coupled with political impasse over the formation of a new government.

“Fiscal discipline and Economic diversification through more private sector participation are critical to reduce Iraq’s vulnerabilities to external shocks,” said Saroj Kumar Jha, World Bank Mashreq Regional Director. “A reform oriented and growth enhancing program will help sustain the reconstruction efforts and preserve the positive improvements achieved in the electricity and agriculture sectors over the past year.  Such a program is also key to create the much-needed jobs for the youth and help restore the confidence of Iraqi citizens.” 

The unsustainable stimulus package introduced since last October - including a rising public sector employment, lower retirement age, and various transfers - coupled with weaker oil revenues are expected to have detrimental fiscal effects.


 In case oil prices stabilize in the low-30s and no reform measures are taken, the budget deficit would exceed 29 percent of GDP in 2020 and gross financing needs would reach US$67 billion (over 39 percent of GDP).

Under this situation, financing options might be limited. Heavy reliance on local financing can crowd-out the available liquidity for private sector credit and weaken the balance sheet of the Central Bank of Iraq creating pressures on inflation and the exchange rate. At the same time, access to international markets may prove to be difficult given global market conditions and Iraq’s weak macro-framework. 

With this context, it has become critical for Iraq to embark on a comprehensive forward-looking economic reform agenda to enable private sector led growth, diversification and job creation. Such a program could be based on two pillars:


 i) Tackling cross-cutting impediments to private-sector led diversification through fiscal sustainability and economic governance, financial sector reforms, business environment reforms, Improving human capital outcomes, as well as social protection and labor system reforms; and 


ii) Improving governance and promoting private sector participation in selected productive sectors like agriculture and agri-food Industries, electricity and gas.

The Iraq Economic Monitor also includes a Special Focus section that highlights the importance of digital transformation for Iraq and the urgency behind it. The benefits of a robust digital economy are numerous. Leveraging the digital economy will help Iraq improve economic opportunities, particularly for its youth, and thus address the demands of citizens.

The digital transformation of the Iraqi economy will require economic reforms and longer-term development priorities along the five pillars of the digital economy framework by ensuring affordable access to high-speed internet, achieving widespread adoption of cashless payments, delivering digital government services and improving access to data, upskilling youth with technological know-how, and scaling up the digital entrepreneurship ecosystem.


 An example of the relevance and urgency of digital transformation has recently materialized with the deployment of innovative digital solutions in the fight against the COVID 19 pandemic across the globe. 

---

Contacts

Washington
Ashraf Al-Saeed
+ 1-202-473-1187

[email=aalsaeed@worldbank.org%20]aalsaeed@worldbank.org[/email]
Beirut
Zeina El Khalil
+ 961-1-963-438

[email=zelkhalil@worldbank.org%20]zelkhalil@worldbank.org[/email]


https://www.worldbank.org/en/news/press-release/2020/05/04/iraq-structural-reforms-critically-needed-to-manage-a-multi-faceted-crisis

Iraq Economic Monitor : Navigating the Perfect Storm (Redux) (English)


ABSTRACT

Iraq, once again, is facing a combination of acute shocks which the country is ill-prepared tomanage. The collapse in oil prices has considerably reduced budgetary revenues and reversed the fiscal surpluses accumulated since 2018. 

COVID-19, and the lockdown measures needed to contain the pandemic have dealt a severe blow to economic activities especially the services sectors like transport, trade, banking and religious tourism, which constitute around half of the non-oil economy. 

The growing discontent over poor service delivery, rising corruption, and lack of jobs persists and is coupled with political impasse over the formation of a new government. 


Iraq’s pre-existing conditions going into this crisis limit its ability to manage and mitigate the socio-economic impact. A large dependency on oil revenues coupled with built-up budget rigiditieslimit Iraq’s fiscal space to respond to the COVID-19 outbreak and offer a stimulus package to re-start the economy. 

An undiversified economy, highly dependent on oil outcomes, as well as large presence of the state in economic and commercial activities, make it hard to create the needed private sector jobs for a predominantly young population.

 Furthermore, rampant corruption and weak governance and service delivery fueled large scale protests across the country calling for better public service delivery and jobs. As a result, all signs indicate that this multifaceted crisis will have a protracted impact. 

The outlook for Iraq, which was already negative prior to the COVID-19 shock, has markedly worsened since. Near-term economic growth will be subdued by low oil prices, a new OPEC agreement that has reduced oil production quotas, and unfavorable global and domestic conditions including disruptions from COVID-19 spread. 

As a result, the economy is projected to contract by 9.7 percent in 2020, down from a real GDP growth of 4.4 percent in 2019, with both oil and non-oil sectors contracting by 13 and 4.4 percent respectively.

 This special focus on digital economy (DE) highlights the importance of digital transformation for Iraq and the urgency behind it. Iraq’s economic condition was gradually improving following the deep economic strains of the last three years.


 However, the recent protests and unrest highlight the continued fragility of the country and the high priority of improving economic opportunities, particularly for youth. Leveraging the DE will help Iraq address some of its citizens’ concerns as well as accelerate the achievement of its development objectives.  


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DETAILS

• AuthorMansour, Wael;Maseeh, Ashwaq Natiq;Celiku, Bledi;Laure, Alexandre Hugo; Haddad, Marolla ; Lu, Zoe Cordelia ;
  
• Document Date2020/05/04 20:16:00
  
• Document TypeEconomic Updates and Modeling;
  
• Report Number148179
  
• Volume No1
  
• Total Volume(s)1
  
• CountryIraq; 
  
• RegionMiddle East and North Africa; 
  
• Disclosure Date2020/05/04 07:30:00
  
• Disclosure StatusDisclosed
  
• Doc NameIraq Economic Monitor : Navigating the Perfect Storm (Redux)
  
• LanguageEnglish
  
• Rel. Proj IDIQ-Iraq Country Economic Memorandum -- P171781;   
  
• TF No/NameTF0B2000-IRRF: Iraq Economic Diversification and Transformation - Pillar 2 (CEM) ;  TF0B2427-IRRF: Iraq Economic Diversification and Transformation - Reform Matrix/
  
• Unit OwningN/A
  
• Version TypeFinal
  
• Product LineAdvisory Services & Analytics
  
  

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QUOTE

Mansour, Wael; Maseeh, Ashwaq Natiq; Celiku, Bledi; Laure, Alexandre Hugo; Haddad, Marolla; Lu, Zoe Cordelia. 2020. Iraq Economic Monitor : Navigating the Perfect Storm (Redux) (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/446201588465646751/Iraq-Economic-Monitor-Navigating-the-Perfect-Storm-Redux

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http://documents.worldbank.org/curated/en/446201588465646751/Iraq-Economic-Monitor-Navigating-the-Perfect-Storm-Redux

IBBC contributes to World Bank launch and assessment on Iraq Economic Monitor

6th May 2020

The World Bank has released its latest report on Iraq entitled “Navigating the Perfect Storm ” with a special focus on “Laying the Foundations for a New Economy in Iraq: Digital Transformation”. See link here.
 
The launch was done via a virtual media roundtable on 4th May and The Press release links can be found in English and Arabic. The report is also being circulated on the World Bank social media outlets.
 
Members of IBBC, the IBBC advisory council, including Professor Frank Gunter, provided input that help shape the final document, that predicts GDP contraction of 9.7% in 2020 and some stark choices and situation the country faces.
 
However, there is an extended section on Digital economy and transformation that points the way to change and opportunity.
 
For further information please contact london@webuildiraq.org

https://iraqbritainbusiness.org/news/ibbc-contributes-to-world-bank-launch-and-assessment-on-iraq-economic-monitor

tructural Reforms Needed to Manage a Multi-Faceted Crisis

http://documents.worldbank.org/curated/en/446201588465646751/pdf/Iraq-Economic-Monitor-Navigating-the-Perfect-Storm-Redux.pdf



https://www.iraq-businessnews.com/2020/05/06/structural-reforms-needed-to-manage-a-multi-faceted-crisis/



Conclusion The WBG and the GoI have jointly identified priority reform areas that have the strongest potential for achieving the objectives of 1)

 private-sector-led diversification and 2) 

reforming governance and promoting private-sector participation in selected productive sectors that can subsequently boost Iraq’s participation in the DE. These priority reform areas cut across all five elements of the DE framework and are meant to boost accountability, transparency, and trust. 

Transitioning Iraq towards a resilient and inclusive DE will require economic reforms and longer-term development priorities along the five DE pillars: ensuring affordable access to high-speed Internet, achieving widespread adoption of cashless payments, delivering digital government services and improving access to data, upskilling young Iraqis with technological know-how, and scaling up the digital entrepreneurship ecosystem.


 The proposed short- and medium-term improvements below are prioritized by promoting actions with the highest potential to keep Iraq on track with its commitment to boosting its DE across the five pillars. These eighteen (18) critical recommendations are also included in the Strategic Note on Priority Reform Areas (aka “Iraq White Paper”):



Immediate- to short-term measures:

 1) removing restrictions on private operators to build, own, and operate domestic and international fiber infrastructure;

 2) promulgating the Payment Systems Law to facilitate digital payments;

 3) providing a timetable to update the 2012–15 e-Gov Strategy and Action Plan for a paperless government; 

4) building confidence with online disclosure of information on public tenders and contract awards, starting with major transactions, and allowing for public feedback;

 5) mandating startups and tech companies registration to select eligible support structures;

 6) adopting a national law on private equity and venture capital funds;

 7) establishing a Seed Capital Fund;


 and 8)


 in partnership with the private sector, piloting digital training programs for youth to increase their access to digital wage employment opportunities such as online freelancing, microwork, telework, outsourcing, etc.




Short- to medium-term measures: 

9) allocating 4G spectrum;

 10) developing and implementing PPPs in the rebuilding of critical fiber infrastructure to achieve 10 percent fiber connectivity by 2023; 

11) rolling out National ID cards, 

12) strengthening the existing cash payment systems through upgrading technologies for improved governance and efficiency; 

13) developing regulations to implement the Payment Systems Law; 

14) reforming the curriculum for digital skills across the education spectrum, ranging from primary to tertiary institutions, including TVETs; 

15) introducing programs that provide demand-driven digital training opportunities for youths; 

16) establishing an electronic system for e-visa issuance to attract foreign investors, 

17) streamlining current legal requirements to start a business; 

18) addressing government accountability in delivering services such as simple e-government tools (example: a mobile-based citizen feedback platform).





http://documents.worldbank.org/curated/en/446201588465646751/pdf/Iraq-Economic-Monitor-Navigating-the-Perfect-Storm-Redux.pdf