International Monetary Fund. Middle East and Central Asia Dept.
Iraq is an oil-dependent and state-dominated fragile economy that has been
hit hard by the conflict with ISIS and the fall in oil prices. The conflict has hurt the
economy through displacement and impoverishment of millions of people, and
destruction of infrastructure and assets. The oil price decline has resulted in a massive
reduction in budget revenue, pushing the fiscal deficit to an unsustainable level. The
authorities are responding to the crisis with ambitious but necessary fiscal adjustment
while maintaining their commitment to the exchange rate peg, which provides a key
nominal anchor in a highly uncertain environment.
The pace of recovery has disappointed in recent years, and downside risks have increased, including from heightened geopolitical tensions. These increased risks make it a priority to raise actual and potential growth. In a number of economies, an increase in public infrastructure investment can also provide support to demand and help boost potential output. And in advanced economies as well as emerging and developing economies there is a general, urgent need for structural reforms to strengthen growth potential or make growth more sustainable. The four individual chapters examine the overall global outlook, the prospects for individual countries and regions, the benefits of increased public infrastructure investment in terms of raising output, and the extent to which global imbalances have narrowed significantly since their peak in 2006.
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