The industrialized world continues to struggle through a prolonged economic crisis. An Iraqi commentator in Berlin considers the impact of this on Iraq and how the country might avoid negative effects of a global recession. in this article from Niqash.
Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
The Euro zone’s debt crisis, the US recession, a slowdown in growth and sharp fluctuations on global markets for stocks, currencies and raw materials: all of these indicate that the world may be facing the worst prolonged economic contraction since that which swept the world’s industrialized countries after World War I.
The question is: what impact will all of this have on Iraq?
At first glance, the answer seems easy. Iraq shouldn’t suffer too much. Iraqi banks don’t hold Greek bonds and don’t much care whether Greece is bankrupt. And as long as they are preoccupied with trying to find solutions to pressing intractable domestic problems, such as power shortages and corruption, Iraqi decision makers are not thinking a lot about what is happening inside the US or European economies.
But such disconnectedness is hardly a good sign. It is an indication that much of the Iraqi economy is not linked to the global one. And this disconnectedness is also seen in Iraq’s financial markets – more specifically in the banking sector and on the Iraqi stock market – which haven’t been able to attract much foreign investment.
Additionally because Iraq is so dependent on oil exports for its national income, the country is exposed to global market fluctuations. Any changes in oil price have an impact on the federal budget. And because, in light of a weak private sector, the Iraqi government is the main driver of the local economy – among other things, the government is the biggest employer in the country – any impact on the federal budget will have an impact on the local economy.
In light of this dependence on oil, the Iraqi government should be thinking about how to build up some financial reserves in case of unexpected developments.