Unlocking Iraq's Economic Potential: The Role of Structural Reforms in Boosting Medium Term Non-Oil Growth

Selected Issues Papers, June 10, 2025

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Canonical URL: Unlocking Iraq's Economic Potential: The Role of Structural Reforms in Boosting Medium Term Non-Oil Growth

Iraq’s non-oil economic growth has been slow, constrained by low productivity, limited investment and an inefficient use of human capital.
The economy faces an excessive dependency on oil, an outsized public sector footprint, a fragile political context, and lingering institutional and governance shortfalls.
Non-oil medium term growth is expected to remain subdued, at 3-4 percent – mostly driven by demographics.
Estimates suggest that a comprehensive reform package could improve growth by an additional 4 percent over the medium-term.

Baseline medium-term non-oil growth projection: 3-4 percent (mostly driven by demographics).
Reform scenario: Comprehensive structural reforms raise medium-term growth by an additional 4 percent relative to the baseline.

Improve governance.
Intensify the fight against corruption.
Streamline labor market and business regulations.
Strengthen the banking sector.
Commit to and implement an ambitious structural reform agenda to unlock sustained non-oil growth and prepare the country for growing social challenges in the next decade.

Employment, Labor, Labor markets, Macrostructural analysis, Production, Structural reforms, Total factor productivity
Employment; Governance; IMF staff calculation; Investment; Labor Market; labor productivity growth; Labor regulation; medium term NON-OIL growth; Middle East and Central Asia; oil growth; Potential Growth; Productivity; Structural Reforms; Total factor productivity

Source: Unlocking Iraq's Economic Potential: The Role of Structural Reforms in Boosting Medium Term Non-Oil Growth (Selected Issues Papers, 2025).