Standard Chartered Bank projected Iraq's economic growth to increase from 3% in 2018 to 4% in 2019, driven by investment and consumption in the country's non-oil sector amid improved security conditions. It expected growth in the oil sector to be constrained in 2019 by OPEC's efforts to rebalance global oil markets. As such, it projected Iraq's oil production to decline from 4.65 million barrels per day (b/d) in October 2018 to about 4.5 million b/d in the first half of 2019. Further, the bank anticipated that an improving security backdrop would support the authorities' reconstruction efforts. Specifically, it considered that the energy and water industries, which have previously been held back by conflict and under-investment, would be the main beneficiaries of reconstruction funding. Still, it noted that financing the country's reconstruction plans require international support, as the private sector's access to funding is limited amid challenges in the banking sector. In addition, the bank noted that the International Monetary Fund has provided Iraq with financial support and has helped mobilize additional resources from international donors and bilateral institutions. But it said that Iraq's reliance on the IMF for funding has decreased given the country's lower current funding needs, which could pose a risk to the implementation of structural reforms.

In parallel, Standard Chartered forecast Iraq's fiscal surplus to slightly increase from 2.9% of GDP this year to 3.1% of GDP in 2019, which is below the IMF's forecast of 3.8% of GDP. Also, it projected the current account surplus to improve but at a slow pace from 1.5% of GDP in 2018 to 2% of GDP next year, due to higher imports resulting from the re-opening of borders with neighboring countries, as well as to a rebound in consumption. Still, the bank anticipated that the gradual rise in foreign currency reserves from higher oil exports receipts would be positive for the sovereign's creditworthiness in the medium term. Further, it did not expect authorities to tap international markets in the near term in the absence of a sustained decrease in oil prices, which would translate in a decline of government debt in coming years. 
Source: Standard Chartered Bank