While BMI Research expects much better growth outside the oil sector, the firm also expects the item to “remain modest over the coming years, therefore limiting specific opportunities for investors.” Iraq’s private sector ranks near the bottom on measurements of transparency as well as corruption.
“Iraq will also be prone to ethnic as well as religious tensions, as highlighted by the recent referendum,” Auberty told CNBC, an independence vote overwhelmingly approved by Kurds however opposed by Iraq’s central government. “This kind of, coupled with social instability means which we could see episodes of violence re-emerging across the country,” Auberty added.
Still, Iraq’s investment profile has much better over the past year, amid rising oil prices as well as the financial lifeline coming from the IMF. The country is actually OPEC’s second-largest producer, pumping more than 4 million barrels per day.
Separately, global ratings agency Fitch Ratings upgraded the country’s outlook coming from negative to stable in March, enabling the government to tap international debt markets in August.
According to BMI, companies which are benefiting coming from support coming from their governments are the most likely to get involved from the rebuilding of Iraq. The United Kingdom, for example, has offered loans worth at least 10 billion British pounds ($13 billion) for the reconstruction process, with British construction companies set to benefit coming from these contracts.
Garbis Iradian, chief Mideast/North Africa economist of the Institute of International Finance, said the tension between the central government as well as the Kurds’ regional leadership in northern Iraq is actually unlikely to escalate or lead to a war.
Both parties, pressured by the U.S. as well as the EU, may eventually strike a deal on “limited independence,” he said. This kind of should keep regional tensions high, with Iraqi Prime Minister Haider al-Abadi authorized by parliament to send government troops to the flashpoint city of Kirkuk.
“Even if the Iraqi government gets bogged down in conflict with Kurds, the negative economic implications, particularly on investment, will be more than offset by the rout of ISIS,” Iradian said.
“The impulse coming from the “end of war with ISIS” or their defeat, will attract significant foreign investment to the energy sector in Iraq. Most sectors of the Iraqi economy are required to benefit, including the energy, mining as well as the financial sector,” the economist added.