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What are the possible scenarios for the Iraqi economy over the next 4 years?.. Haider Murtada 2022-02-05 Haider Mortada wrote: The Iraqi economy is still going according to the scenario we expected three years ago. The political class still supports consumption, not production! What are the possible scenarios for the Iraqi economy over the next 4 years? To begin with, it is good to pay attention to the difference between: (a well-functioning economy) and (well-functioning factories) Since 2003, the Iraqi economy has been working and growing well, but everyone knows, that its growth was the result of the export of oil, and not the product of the work of factories, and therefore some consider that the Iraqi economy is distorted, and it is still in the danger zone despite all its good growth rates. After knowing this simple difference, it becomes easy to address the options available to the Iraqi Prime Minister! Generally speaking, there are two paths or two scenarios, one of which the Prime Minister will take: The first scenario: which is considered the traditional option for Iraqi politicians, which is to make the economy work well, by exporting oil, then distributing its revenues in the form of: Increasing government employment and granting salaries. Granting (bank loans), whether personal loans, or home building loans. Certainly, following this strategy has previously contributed, and will contribute in the future to the growth of the Iraqi economy, as this growth will be measured by the (GDP) indicator. And then, at the end of the 4 years, the Prime Minister will speak at his press conference: Look (the Iraqi economy is growing, the economy is doing well) But it became known that the growth of the economy did not come from the increase in factory production, but rather from the oil wealth that is being depleted. The question now is: Are construction loans and personal loans a bad thing? Well, in the American economy, for example, the rise in the home building index is a positive indication of the health of the American economy; Because new homes require raw materials and furniture, and this is what will make the American factories work well. As for Iraq, building homes will translate to more foreign imports, and more trade deficit.. This is first. Second: Granting personal loans and construction loans will crowd out loans supposed to be granted to factories and productive projects. Banks prefer personal loans and construction loans, because they are loans that are guaranteed to be repaid. Since they are granted under the guaranty of government employees, while commercial and capital loans are often the highest risk, banks have been lazy about managing production risks, and have turned to consumer secured loans. Here, it would be good to talk in a separate article (Are the interests of secured loans in Iraq fair or high?!) The third effect: that the provision of personal loans and construction loans by banks contributes to the rise in inflation, and this prompted the Central Bank of Iraq to raise interest rates to curb inflation, and as a result (the productive sector) in Iraq bore a higher interest on its loans as a result of (consumer spending). As a personal opinion, the Prime Minister will move towards this easy scenario in running the wheel of the Iraqi economy during the next stage. The second, least likely scenario: that the Prime Minister adopts a strategy that “the factories are working well.” This is a good thing, but it is a great challenge for him. The economy that grows due to the work of factories is a real productive economy, not a rentier consumer economy based on the export of oil. The best indicator to know that the Prime Minister began to adopt the scenario (factories are working well), is the Iraq Stock Exchange Index, (ISX 60) The Iraqi Stock Exchange index consists of 9 sectors (banks, insurance, investment, services, industry, hotels and tourism, agriculture, Communications, money transfer). Of course, the word “factories” is a metaphor, and it can generally mean hotel establishments, banks, agricultural and animal establishments, and insurance companies. This indicator can be considered more honest than the GDP indicator, and the growth of this indicator means that companies are growing and will need to hire more people, who will produce real products and services, which are provided to the people and exported to the global community. When (Iraq's factories are working well), huge investments will flow to buy the shares of these factories and companies, and for this this indicator will grow; But what happened is that this indicator collapsed, after it was in 2015 at levels of 1000 points, today it is trading at levels of 500 points! Thus, this indicator is the best expression of the reality of the productive economy in Iraq, and whether it is heading for revival or further collapse. Returning this indicator to its true levels and making (factories work well) requires reining in the first scenario! Hence, we considered it a challenge to the Prime Minister, who is considered a thumb that can reach all fingers, coordinate the movement of his economic team, and set the pace of Iraq's economic strategy. The transition from (the economy that is growing) to (factories that are working well), is a process of change, and any change process is difficult in nature, and it takes time and requires sacrifices and high diplomacy. The challenge and the advancement of Iraqi factories?! This is what we will monitor over the next four years. #Thinking_with an economic_mindset .