Has Iraq begun to recover economically after years of crisis?
In the heart of the Middle East, Iraq remains a country of strategic and geographical importance, but it suffers from accumulated crises that have greatly affected its economy. Today, after years of conflict and suffering, an important question arises: has Iraq begun to recover economically? This report reviews the obstacles and challenges facing the Iraqi economy, along with the initiatives and reforms that may help guide the country toward a better economic future.
A history of challenges
Despite more than two decades since the political change in Iraq, the Iraqi economy has not yet settled on a clear and independent identity. The Iraqi economy remains a strange mix of past socialism and present capitalism, where old economic features intertwine with attempts at economic modernization. This unique economic combination, along with financial, political, security, administrative, and legislative challenges, has severely hindered the process of national economic reform.
Over the past decades, Iraq has faced a series of economic crises that began with the Iran-Iraq war in the 1980s, which drained the country’s resources. This was followed by the Gulf War and the international embargo, which significantly weakened the Iraqi economy. These difficult conditions deeply affected the Iraqi economy, making the process of recovery and revival an ongoing challenge.
The main economic sectors in Iraq
The main economic sectors in Iraq have seen a surge in results over the past period, amid government efforts pushing Iraq to make up for lost ground and develop its capabilities in sectors such as industry and agriculture, alongside the oil and gas sector, which are the backbone of the Iraqi economy.
The oil and gas sector
The oil and gas sector is the backbone of the Iraqi economy, with oil accounting for more than 95% of GDP. Iraq has seen an oil boom since 2003, with production rising to over 4.22 million barrels per day in 2023. The Iraqi government plans to increase production to 5 million barrels per day by 2025. As for the gas sector, it aims to achieve self-sufficiency and reduce dependence on imported gas, especially from Iran.
The industrial and agricultural sectors
Iraq was one of the prominent industrial countries in the mid-20th century, but wars and conflicts have greatly reduced this sector. The Iraqi government is now trying to rehabilitate idle factories and create new industrial centers to support economic diversification.
The agricultural sector has seen multiple developments but faces significant challenges such as water scarcity and poor management. However, Iraq achieved self-sufficiency in wheat production in 2024, and the government seeks to improve this vital sector.
The path to development
In transportation projects, the current Iraqi government has launched several strategic development projects, the most notable being the “Development Road” project, which aims to bring about a qualitative leap in the transport and industrial sectors. This project links Iraq with Turkey and Eastern Europe through modern railway lines and fast commercial transport trains, extending 1200 kilometers from the port of Fao in the south to the Iraqi-Turkish border in the north, then through Turkish territory towards Istanbul.
The government seeks to make this project a bridge for commercial movement between Asia and Europe, aiming to compete with the Suez Canal for market shares. The project also aims to attract investments to create development projects along the land corridors, such as manufacturing, logistics centers, value-added services, and warehouses, in addition to the industries Iraq lacks.
Despite the media attention given to the “Development Road” project, it has not succeeded in attracting investors to finance it, raising questions about the feasibility of the project and Iraq’s readiness to implement and operate it. One reason could be the heavy reliance of international commercial transport on maritime transport, which is less costly and more capable of moving large quantities of goods compared to land transport. For example, cargo ships can transport more than 20,000 standard containers on average, while trains can only transport a few hundred containers per trip.
International maritime transport provides fluidity, safety, and reliability that land transport may not be able to continuously provide, especially if transport routes pass through unstable security or political areas. For decades, production and supply chains between manufacturing centers in Asia and consumption centers in Europe have relied on maritime transport, creating an integrated global economic model.
The Iraqi government announced that it had commissioned an unknown Italian company in the international transport sector to study the feasibility of the project, raising questions about the accuracy and sufficiency of the study of the “Development Road” project. The success, competitiveness, and sustainability of the project require more study and review, taking into account the requirements of the international transport system.
Although the “Development Road” project is important, priority should have been given to revitalizing the industrial sector, alongside the expansion of commercial transport projects. This approach ensures optimal economic use of transport corridors, contributing to the delivery of national products to local markets and land and sea export outlets.
In April 2024, Iraq signed a memorandum of understanding with Turkey, Qatar, and the UAE to proceed with this project, indicating that the direction has become more realistic and consistent with the requirements of enhancing economic cooperation between regional countries.
Baghdad Metro Project
The Iraqi government announced the launch of the “Baghdad Metro” project, a strategic project aimed at creating a comprehensive public transport network covering 84% of the capital Baghdad’s area, extending 148 kilometers of transport lines connected by 64 stations.
This project represents a modern model of transport within the capital Baghdad and aims to solve the chronic traffic congestion problem that negatively affects the city’s economic, social, and security activities. The estimated cost of the project is about 17 billion US dollars, and it is expected to benefit the country in the long term.
The Baghdad Metro project is not entirely new, as it was first proposed for study in the late 1970s, and gained attention again after 2004. Previous attempts failed due to the complex security, economic, and political conditions in Iraq.
Now, the conditions seem favorable for the current Iraqi government to achieve what previous governments could not and effectively start implementing the project. The Baghdad Metro project could be key to solving the internal transport crisis and reducing traffic congestion in the heart of Baghdad.
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Improving management and diversifying the economy
Strengthening the Iraqi economy requires adopting comprehensive structural reforms and effectively utilizing available resources. The government must fight corruption, improve management, and diversify the economy away from heavy reliance on oil. Achieving these goals requires concerted efforts and the implementation of sustainable economic policies, to ensure a better future for Iraq and its people.
Iraq remains a country with vast economic potential, but it requires radical strategies and reforms to recover from past crises and build a sustainable economy. Current reform steps provide hope for a more stable and prosperous economic future if implemented effectively and transparently.
