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. Against the background of 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. To unlock its potential for sustained growth and prepare the country for growing social challenges in the next decade, Iraq should commit to and implement an ambitious structural reform agenda. Estimates suggest that a comprehensive reform package aimed at improving governance, intensifying the fight against corruption, streamlining labor market and business regulations, and strengthening the banking sector could improve growth by an additional 4 percent over the medium-term.