2017 Index of Economic Freedom

Iraq

overall scoreN/A
world rank
Rule of Law

Property Rights37.3

Government Integrity19.1

Judicial Effectiveness15.9

Government Size

Government Spending36.1

Tax BurdenN/A

Fiscal Health11.3

Regulatory Efficiency

Business Freedom61.2

Labor Freedom68.0

Monetary Freedom76.9

Open Markets

Trade FreedomN/A

Investment FreedomN/A

Financial FreedomN/A

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Quick Facts
  • Population:
    • 37.0 million
  • GDP (PPP):
    • $544.1 billion
    • 2.4% growth
    • 5.7% 5-year compound annual growth
    • $15,474 per capita
  • Unemployment:
    • 16.9%
  • Inflation (CPI):
    • 1.4%
  • FDI Inflow:
    • $3.5 billion
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The collapse of oil prices significantly damaged Iraq’s long-term fiscal health, investment climate, and standard of living. Prime Minister Haider al-Abadi has enacted measures to reform state-owned enterprises, fight corruption, and reduce bureaucratic bottlenecks, but overall progress has been uneven and marginal. Due to the absence of reliable data, Iraq is not ranked in the 2017 Index.

Among other ongoing challenges, Iraq’s economy lacks effective monetary and fiscal policies. The weak state of the financial system, coupled with its limited role within the economy, also makes development of a much-needed dynamic private sector extremely difficult and fragile. The main challenges are improving security and restoring the rule of law.

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Background

Iraq has become increasingly unstable since 2013 due to the rise of the Islamic State (formerly known as the Islamic State in Iraq and Syria, or ISIS) and declining world oil prices. Prime Minister Nuri al-Maliki’s party won the largest number of seats in the April 2014 parliamentary elections, but he alienated Sunni Arabs and Kurds with a heavy-handed sectarian agenda. He stepped down in August 2014 and was succeeded by Haider al-Abadi. The oil industry provides more than 90 percent of government revenue. The war against the Islamic State imposes a high cost on the economy, and the central government is corrupt and ineffective.

Rule of LawView Methodology

Property Rights 37.3 Create a Graph using this measurement

Government Integrity 19.1 Create a Graph using this measurement

Judicial Effectiveness 15.9 Create a Graph using this measurement

Partly as a result of the state’s limited administrative capacity, property rights are not well protected. The judiciary in Iraq is heavily influenced by political, tribal, and religious forces. Officials throughout the government often engage in corrupt practices with impunity, and investigation of corruption is politically influenced. Bribery, money laundering, nepotism, and misappropriation of public funds are commonplace.

Government SizeView Methodology

Individual and corporate income tax rates are capped at 15 percent. Tax revenue as a percentage of GDP is negligible due to high levels of evasion and lax enforcement. Public spending is estimated to equal more than half of total domestic output, and the budget records surpluses only because of oil revenue, which funds more than 90 percent of government expenses. Public debt is equivalent to 66.1 percent of GDP.

Regulatory EfficiencyView Methodology

The application of existing regulations has been inconsistent and nontransparent. In the absence of a well-functioning labor market, informal labor activity persists in many sectors. The government has struggled to comply with 2016 IMF requirements that it make politically difficult reductions in fuel and food subsidies even as it faces lower revenues from oil and instability caused by ISIS.

Open MarketsView Methodology

Trade is important to Iraq’s economy; the value of exports and imports taken together equals 50 percent of GDP. Judicial and regulatory system problems discourage foreign trade and investment, and numerous state-owned enterprises distort the economy. Iraq’s cash-based economy lacks the infrastructure of a fully functioning financial system. The legal and institutional framework has not strengthened enough to deepen financial intermediation.

Country's Score Over Time

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Regional Ranking

rank country overall change
1United Arab Emirates76.94.3
2Qatar73.12.4
3Israel69.7-1.0
4Bahrain68.5-5.8
5Jordan66.7-1.6
6Kuwait65.12.4
7Saudi Arabia64.42.3
8Oman62.1-5.0
9Morocco61.50.2
10Tunisia55.7-1.9
11Lebanon53.3-6.2
12Egypt52.6-3.4
13Iran50.57.0
14Algeria46.5-3.6


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