In-depth country-focused analysis on Iraq's economic, political and operational risk environment, complemented by detailed sector insight


Our comprehensive assessment of Iraq's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Iraq, as well as the latest industry developments that could impact Iraq's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Iraq before your competitors.

Country Risk

Iraq Country Risk

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Core Views

  • Islamic State will remain well entrenched over the coming year, and Iraqi security forces (ISF) and its allies will focus on re-conquering the Anbar province. Iraq will maintain formal unity within a fragile federalised state over the coming decade, with the Kurdish region retaining significant autonomy but not outright independence.

  • Stronger headline growth of the Iraqi economy in 2015 will result from accelerating oil exports. Conversely, domestic expansion will be sluggish and uneven; consumer spending and capital formation will be hit hard by political instability, and declining oil prices will hinder the government's ability to prop up spending.

Major Forecast Changes

  • Iraq's current account surplus will narrow significantly in 2015 as declining oil...

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Iraq Operational Risk Coverage (9)

Iraq Operational Risk

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BMI View: Iraq represents huge potential for trade and investment. Simply put, Iraq is potentially one of the world's naturally wealthiest nations and has until recently exhibited one of the fastest growing economies. However, at present Iraq is one of the regional underperformers for Trade and Investment Risks, due to the lack of rule of law and weak financial sector. Its score of 32.7 out of 100 places it in 16th position out of 19 countries in the region, slightly ahead of Syria and Yemen.

Iraq has created many incentives designed to foment investment in the region, and scores reasonably well with regard to initiating commercial ventures or branching businesses into Iraq. However, there are several...

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Iraq Crime & Security

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Iraq is one of the most unsafe locations in the world for foreign businesses and workers. An extremely strong threat of terrorist activity, crime, and violence pervades Iraqi society, and there is also an inefficacy and ineptitude on behalf of the Iraqi security forces to combat such threats and provide security to Iraqi civilians and foreign nationals travelling in Iraq. In the BMI Crime and Security Risk Index, Iraq has the third lowest score in the MENA region, and the fourth lowest globally, at 6.6 out of 100, placing it among the most dangerous countries in the world including Sudan, Afghanistan, and Syria.

By far the biggest security risk affecting Iraq is the threat of terrorism. The resurgent terrorist groups that have been resourced and fuelled by the Syrian civil war have motivated themselves to vastly increase the number of violent attacks they carry out in Iraq over the past 18 months. This has culminated...

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Iraq Labour Market

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BMI View: The US-led invasion of Iraq in 2003 has caused a cascade of problems which have decimated the country's labour market. The education system suffered severe infrastructural damage, while many teachers and academics were killed or forced to flee. The current governmental and humanitarian crisis has further exacerbated the instability of the Iraqi labour conditions. Consequently, both access to schools and the quality of education is poor, lowering the overall skill level of the labour force. A lack of job creation has also resulted in high unemployment, while preventable diseases and unexpected injuries are highly likely to affect the workforce. The country's main mitigating factors are its large unskilled labour force and low employment costs, which benefit...

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Iraq Logistics

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Iraq is affected by several logistics risks, not least the unreliability of its electricity supply, the inadequacy of transport infrastructure, and the prohibitive cost of international trade. All of these factors increase the risk for investors and businesses looking to enter the Iraqi market. These risks are mitigated somewhat by the size of the Iraqi market, as it is forecast to grow strongly in its reconstructive phase following the 2003 incursion. Overall Iraq scores 41.8 out of 100 in BMI's Logistics Risks Index, placing it in 15th position regionally out of 19 countries. That it is sitting marginally above poverty-stricken Algeria and Yemen, and conflict-wracked Libya and Syria, is representative of the severity of the operational risks posed by Iraq's limited transport and utilities infrastructure and complex and costly trade bureaucracy.

The quality and extent of Iraq's transport infrastructure is erratic. The...

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Iraq Trade & Investment

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Iraq represents huge potential for trade and investment. It is currently generating up to IRD10bn a month from oil exports, a figure which could easily treble by the end of the decade. Further massive revenues are expected from Iraq's infant gas industry, which will recover IRD10 million of gas per day once the planned capture programme comes on stream in 2014. On top of this, Iraq has not even started to mine the rich mineral wealth beneath its deserts and mountains, including gold and platinum. Simply put, Iraq is potentially one of the world's wealthiest nations and already has one of the fastest growing economies. However, at present Iraq is one of the regional underperformers for Trade and Investment Risks, due to the lack of rule of law and weak financial sector. Its score of 31.2 out of 100 places it in 5 th lowest position out of 18 countries in the region, slightly ahead of neighbours Iran and Syria. However, Iraq could still be seriously...

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Iraq Industry Coverage (9)


Iraq Autos

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We now expect car sales in Iraq to fall 45% in 2015, after a bombing at a major car dealership highlighted the security risks to consumers. Spending on luxury items such as cars is also being impeded by reduced purchasing power, with our Country Risk team forecasting GDP per capita of USD5,687 in 2015, compared with USD5,795 in 2013.

We do expect a return to positive sales growth in 2016, although this will be a relatively small increase of 2.0%, far below the market's potential, given the country's car ownership level of around 140 cars per 1,000 people. It will be 2017 before we see any meaningful acceleration of growth to 5.0%, by which time our Country Risk team forecasts private final consumption growth to be back at 4.0%.

Given that Iraq is more of a long-term play now, countries are staying for the long-haul. Egypt's largest vehicle assembler and distributor, GB Auto...

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Defence & Security

Iraq Defence & Security

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BMI expects the Iraqi defence budget to be worth USD25.7bn in 2015, which is a significant increase on the USD22.2bn expected by the end of 2014. Despite a slight improvement in the domestic situation on the previous quarter, as a result of international support to shore up the government and the security forces, BMI expects Iraq to be plagued with governance and security difficulties for the foreseeable future.

We have given Iraq an overall security risk rating of 27 for Q115. To us, it seems evident that Iraq's greatest security risk is terrorism, both domestic and international, leaving it with a score of mere 16 out of 100 for Q115. That said, we think that the country is also affected by wider interstate tensions occurring across the Middle East and that its weak governance and security architecture leaves the domestic scene vulnerable to the power play politics of external actors, Notably...

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Iraq Infrastructure

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BMI View : The negative view of Iraqi construction and infrastructure that has pervaded our outlook for several quarters has had little reason to change this quarter. While the security situation, particularly in the Islamic State (IS)-held north of the country, worsens, the government's ability to finance infrastructure will remain limited and private investment will be deterred. On a positive note, the World Bank has agreed a USD350mn loan to help rebuild infrastructure in war-damaged regions. In the investment bright spot of Kurdistan, the regional government has passed a law allowing the region to tap international capital markets for USD5bn towards infrastructure development.

Iraq's construction industry is being severely affected by the poor security situation, with the IS insurgency even affecting business sentiment in the...

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Medical Devices

Iraq Medical Devices

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BMI Industry View: We forecast that the medical device market will experience moderate growth. A lack of healthcare facilities, the instability of the political environment and declining oil prices are likely to affect the competitiveness of the market. As there is very little domestic production, the market is heavily reliant on imports, which have experienced strong growth in recent years but declined in Q414, while the level of exports is very low.

Headline Industry Forecasts

  • In spite of robust growth in recent years,...

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Iraq Mining

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BMI View: The mining sector of the Middle East and North Africa will see strong growth in over the coming years, especially given easing sanctions on Iran. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.

The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for sanctions to be eased from Q116 which will have be a game changer for the country's beleaguered mining industry...

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Oil & Gas

Iraq Oil & Gas

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BMI View: Oil production in Iraq will increase 15% y-o-y in 2015, despite the uncertainty in the security situation, strain on the oil agreement with Kurdistan, and the growing humanitarian and social challenges. Longer term growth in the oil sector will be restrained by poor contracts, the weak financial position of the government and low oil prices.

Headline Forecasts (Iraq 2013-2019)
2013 2014e 2015f ...

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Pharmaceuticals & Healthcare

Iraq Pharmaceuticals & Healthcare

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BMI View: Iraq's pharmaceutical market will remain an unattractive proposition for multinational drugmakers in the short-term at least. Lower oil prices and the presence of Islamic State will subdue government finances, and the cutting of subsidies will negatively impact consumer purchasing power, both feeding in to a subdued outlook for pharmaceutical consumption.

Headline Expenditure Projections

  • Pharmaceuticals: IQD1,953bn (USD1.64bn) in 2014 to IQD2,106bn (USD1.74bn) in 2015; +7.8% in local currency and +5.7% in US dollar terms. Forecast downgraded from Q215 due to the availability of new trade data.

  • Healthcare: IQD13,347bn (USD11.2bn) in 2014 to IQD14,...

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Iraq Telecommunications

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BMI View: The resilience of Islamic State (IS) in Iraq continues to pose serious challenges to operators in the country, resulting in elevated operating costs, large subscriptions losses and falling revenues in the first quarter of 2015. While BMI expects it will take at least 18 months to overcome the present security risks, Iraq remains a fundamentally attractive market, owing to a large population, a mobile penetration rate below 90% as of March 2015, and the recent allocation of 3G licences and launch of mobile data services at the beginning of the year. The latter, in particular, will enable operators to expand a rich portfolio of non-voice value added services, which have been tried and tested in neighbouring markets, to Iraqi consumers for the first time.

Key Data


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Iraq Water

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BMI View: We have substantially expanded our forecasts this quarter, and now cover water extraction by source, including desalination, household water consumption, households connected to mains networks, and water losses. We expect the majority of our forecasted indicators to see a substantial decline over 2015 in the wake of IS' continued targeting or water facilities, and do not anticipate a full recovery until the end of our forecast period. However, should the conflict continue or intensify, with IS destroying facilities as opposed to capturing them, then this poses a significant downside risk to our forecasts. Should the conflict continue beyond the end of 2015, this will represent a further downside risk.

ISIS now controls or has a presence near a number of key river dam water supply facilities across Iraq, particularly those on the major Tigris and Euphrates rivers, which represent Iraq's key freshwater...

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