Economy Starts to Hum, but Projects Need to Ramp Up

By Sherif Salem.

As has often been the case in Iraq, developments in recent weeks have inspired both pessimism and optimism.

On the one hand, an increase in bomb attacks – with 300 fatalities in April – raised fears of a return to the peak in levels of violence seen of 2005-2006. And events in neighbouring Syria have served to heighten nerves.

However, on the economic front, there has been a steady flow of positive news. Fortunately, investors seem to be focusing on this, and taking a long-term view, with the stock market holding firm. This is important as Iraqi companies will increasingly turn to capital markets in coming years to build scale and seek to fulfill their potential.

Firstly, global oil majors continue to pour money into the development of key oil fields, which is vital for long-term economic stability. BP allocated $2.85 billion to further develop the Rumaila oilfield this year, up from $2.2 billion last year. Exxon Mobil is spending $1.65 billion on the West Qurna 1, slightly up on the $1.6 billion spent last year.

Iraq aims to raise oil production to 6 million barrels per day (bpd) by 2017 from the current 3.1 million, which should fund a huge programme of spending on social and physical infrastructure.

On the micro level there are also signs that the grassroots Iraqi economy is starting to hum. For example, Al Mansour Bank, in which Qatar National Bank (QNB) has a majority stake, has just reported loan growth of 12 percent in the first quarter, compared to a year earlier. However, with deposits expanding more than four-fold from a year earlier, the scope for lending should be much higher.

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