IRAQI OIL WEALTH NOT ENOUGH FOR BROAD ECONOMIC GROWTH

[Wiljor]

Iraq, August 5, 2017 

Corruption and internal political rifts could be factors weighing on the economy of OPEC-member Iraq, a report from Moody’s Investors Service said.

Moody’s gave Iraq a Caa rating, its third lowest. Entities rated Caa are exposed to “very high” credit risks. The report, emailed to UPI on Friday, found Iraq was well-endowed with oil wealth, but lacks economic growth opportunities from other sectors.

Iraq is a member of the Organization of Petroleum Exporting Countries and party, albeit reluctantly, to a multilateral effort to stem production in order to balance an oversupplied market for crude oil. According to secondary sources reporting to OPEC, production in June, the last full month for which data are available, was 4.5 million barrels per day, an increase of more than a half million barrels from the previous month.

 

Oil represents half of its gross domestic product, nearly all of its exports and accounts for 90 percent of government revenue. Because it’s a capital-intensive industry, however, oil extraction accounts for only 1 percent of total employment in the Iraqi energy sector, Moody’s found.

“Real GDP growth is highly volatile and is likely to be weaker going forward than it has been in the past,” the report read.

The overall economy is robust, but non-oil GDP contracted by 1 percent during the first half of the year. Moody’s said it expected the economy in Iraq will contract by 0.4 percent and continue its slow down at least through 2022.

“Moreover, we expect regional tensions within Iraq, particularly with regard to the Kurdish region, to be an ongoing source of domestic political risk,” the report read.

A referendum for Kurdish independence from Iraq is set for Sept. 25. A spokesperson for the Kurdish government, Safeen Dizayee, told a delegation in London last month the referendum would correct past mistakes from Baghdad, including budgetary issues related to oil and entitlements for some of the Kurdish fighters supporting broader counter-terrorism efforts.

“The combination of domestic and geopolitical risks affects the government’s capacity to service its debt, which weights very heavily on Iraq’s rating,” Moody’s report read.

ekurd

http://iraqdailyjournal.com/story-z15705484

[Rockymtnhi]

A Caa rating is not encouraging to other countries/banks to lend Iraq money.  This coupled with a contracting economy and regional tensions is not good news to the International community looking for a ROI on any possible investments.   

[RJ45]

42 minutes ago, Rockymtnhi said:

A Caa rating is not encouraging to other countries/banks to lend Iraq money.  This coupled with a contracting economy and regional tensions is not good news to the International community looking for a ROI on any possible investments.   

 

No, but that's just with Moody's. There are other credit rating bureaus.  Iraq has also been making nice with Saudi Arabia, Iran, Russia, Korea, UK, the Netherlands, the US -- they have been receiving assistance, getting loans at less than 2% with 20 years to pay back, cutting public spending, reducing their reliance on oil revenues, are in the process of building a new port, and are rebuilding their infrastructure. This credit rating is one negative compared to a huge list of positives. They have a lot of work to do to get back to the 1IQD = $3+USD range, but I see this as a minor stumbling block on the path to RV and a decent ROI.