SULAIMANI (ESTA) — The United Nations recommended Iraq to develop non-oil private sector economy to reduce dependency on oil, as the country is facing an economic hardship due to fall of oil prices and coronavirus pandemic.
The U.N. Development Program (UNDP) issued a new report on Iraq’s economic recovery from the COVID-19 pandemic on Wednesday.
“While Iraq’s macroeconomic and fiscal conditions were broadly positive in the last few years, two major shocks have disrupted this progress including the oil crisis and the COVID-19 pandemic,” said Resident Representative of UNDP Iraq, Zena Ali Ahmad.
“This has significant impacts on communities, especially in relation to income, employment and poverty, with the real potential to significantly increase inequality,” she added.
The report said Iraq’s GDP is expected to reduce by nearly 10 percent in 2020, and the fiscal deficit is forecast to reach the unprecedented level of nearly 30 percent of GDP in 2020.
The UNDP’s report recommended that the Iraqi government rapidly identify additional financing options, avoid unplanned monetary adjustment, and improve the quality and targeting of public expenditure.
The federal government should also “support the non-oil private sector economy to grow and reduce dependency on oil, while continuing to provide employment for a large number of the most vulnerable and low-income households by extending social assistance schemes.”
Iraq, OPEC’s second-largest producer of crude, is facing an economic crisis over falling of oil prices and an OPEC+ agreement to cut production by more than one million barrels per day as well as the coronavirus pandemic.
A large portion of Iraq’s budget relies exclusively on oil exports while the oil prices have plummeted amid the global recession due to the pandemic.
The World Bank estimates Iraq’s economy will shrink 9.7% in 2020 on back of lower oil prices and coronavirus, compared to 4.4% growth in 2019.