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

  • Risks of a return to full-blown civil war are elevated following the takeover of jihadist group Islamic state (IS) of the country's north and west.

  • Robust headline growth of the Iraqi economy in 2014 and 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 prices will hit the value of hydrocarbons exports. We forecast Iraq's current account to come in surplus of 6.5% of GDP in 2015, from our previous forecast of 10.0% of GDP and compared to surplus...

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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. 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 thlowest position out of 18 countries in...

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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. Consequently, both access to schools and the quality of education has suffered, 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. Iraq is therefore ranked 13 thout of 18 states in the MENA region in BMI ' s Labour Market Risk Index, with a score of 44.9 out of 100. The country's main mitigating factors are its large unskilled labour...

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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)

Autos

Iraq Autos

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The worsening security situation in Iraq, particularly around the key autos market of Kurdistan, has prompted us to revise down our car sales forecast for 2014. In line with our view that security would be one of the biggest threats to the industry during the year, the announcement of US airstrikes, as well as potential disruption to trade routes for importers, mean the strong start to the year will end in a contraction of the market ( see 'Security And Instalment Plan Creates Car Sales Balancing Act', June 3). While much will depend on the duration of the conflict, we forecast a decline of 12.0%, with average growth for the rest of the forecast period from 2015-18 limited to 3.0% as increased inflation carrying over to 2015 also hits purchasing power.

We believe that a number of factors will result in the market declining further over H214. In addition to the fact that the conflict in the country will make big ticket...

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Defence & Security

Iraq Defence & Security

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We expect Iraq to spend up to USD21bn on defence in 2014. For the remainder of the forecast period, up to and including 2018, we expect Iraq to spend an average of USD33.9bn on defence annually. By 2018, we expect the country's defence budget to have reached USD42.9bn.

We have given Iraq and overall security risk rating of 42 for Q414. On average, the country scores an overall security risk rating of 49 for the period December 2007 until Q414. We believe Iraq to have a low risk of becoming involved in a major interstate conflict. Nevertheless, the country continues to suffer high incidences of terrorist attack and also criminal activity.

From January 2014, the Islamic State of Iraq and Syria (ISIS); an Islamist insurgent organisation which has a strong presence in Iraq and in Syria, and has began to capture significant quantities of Iraqi territory which remain under its control. As of July 2014 a swathe of territory...

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Infrastructure

Iraq Infrastructure

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BMI View : Due to the ongoing deterioration of security in Iraq following the rise of Islamic Sta te (IS) we substantially lowered our real growth forecasts for the construction sector last quarter. IS is now in control of large swathes of Iraq's north and west, and while the threat to the oil industry is minimal, the ongoing political and security unrest remains a significant hindrance to Iraq's future. Ongoing delays in the formation of a new government and an inability to agree a 2015 national budget are further hindrances to potential growth.

Key Developments: 

  • We are currently maintaining our forecasts for growth in Iraq's construction industry at an average rate of 5.2% per year through to...

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Medical Devices

Iraq Medical Devices

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BMI Industry View:   The medical device market is expected to experience moderate growth over the forecast period, led by growth of consumables, dental products and patient aids . T he instability of the political environment is likely to have a negative effect on market growth. As there is very little domestic production, the market is heavily reliant on imports, which have experienced strong growth in recent years, while the level of exports is very l ow .

Headline Industry Forecasts

  • The medical device market was valued at US$463.8mn in 2013, equal to US$13.7 per capita. The...

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Mining

Iraq Mining

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We expect to see strong growth in the mining sector of the Middle East and North Africa over the coming years. 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 negotiations to continue and for limited sanctions relief to be rolled over until 2015. This will benefit the mining sector as it is one of the beneficiaries of an easing of sanctions. On the upside, if negotiations are successful (which we currently give a likelihood of 25%), it will be a game changer for the country's beleaguered mining...

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Oil & Gas

Iraq Oil & Gas

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BMI View:   The escalation of the security situation in Iraq has been detrimental to the progress of the country and significantly impacted its future oil and gas growth prospects. Gas projects in the west and north have been cancelled or suspended due to violence, while major oil and gas companies have delayed expansion projects and evacuated non-essential staff.   As a result we have revised down our long-term oil production forecast.

Headline Forecasts (Iraq 2012-2018)
  2012 ...

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Pharmaceuticals & Healthcare

Iraq Pharmaceuticals & Healthcare

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The long-term prospects for the Iraqi pharmaceutical and healthcare markets remain promising given rising healthcare expenditure as well as further population growth. The Iraqi government has reportedly pledged to invest USD12bn into healthcare expansions in 2014, and the Ministry of Health recently awarded 18 health project contracts worth USD276mn. However, the projected growth of Iraq's pharmaceutical market in 2014 and 2015 is linked to an oil-driven economic expansion, which is dependent on the government's ability to represent and appease the country's factions. In the short term, numerous factors, however, will continue to hamper market growth such as expected further political unrest with accompanying high level of violence and even the possibility of a partition of the country.

Headline Expenditure Projections

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Telecommunications

Iraq Telecommunications

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BMI View:   Iraq's mobile market recorded strong growth throughout 2013 and H114, in line with our view of continued subscriptions growth over our five-year forecast period to 2018. While we expect strong competition and a penetration rate still below 100% to underpin healthy subscriptions growth, the worsening security situation in the country poses important downside risks for the telecoms market. Most notably, we expect the current security situation to delay the allocation of 3G spectrum and curtail operators' willingness to invest in rolling out next-generation mobile data networks in the country. This postpones one of the greatest growth opportunities in Iraq's telecoms market and could potentially result in more rapid decline in ARPUs as operators have little means of offsetting the impact of price competition in the voice market.

Key Data...

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Water

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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