Iraq's economy is highly dependent on the oil sector, remaining vulnerable to unstable global market trends. In recent years, the country has shown low growth rates – 0.9% in 2023 and 0.3% in 2024 – due to a decline in the price and volume of crude oil production in accordance with OPEC+ quotas. In addition, growth in the non-oil sector slowed significantly in 2024.
Iraq's real GDP is expected to decline by 1.5% in 2025, partly due to a significant drop in oil prices in the first half of the year. The country's economic outlook depends entirely on the situation on the global hydrocarbon market. Although Iraq has managed to maintain internal stability amid regional tensions, the complex political and economic situation in the world creates additional risks for a country that is extremely dependent on external factors. Existing structural problems create difficulties for the economy due to the lack of alternative sources of growth after the low base effect has been exhausted and consumer activity has recovered in the post-pandemic period, as well as record high oil prices in 2022.
Inflation in Iraq is gradually declining amid a relatively weaker post-pandemic recovery period and the Central Bank's efforts to absorb liquidity. At the end of 2024, the rate stood at 2.6%, which is significantly lower than the price growth rates seen in previous years (6.0% in 2021, 5.0% in 2022, and 4.4% in 2023). In the medium term, inflation is expected to remain moderate.
