2014 Index of Economic Freedom

Iraq

overall scoreN/A
world rank
Rule of Law

Property RightsN/A

Freedom From Corruption13.7

Limited Government

Government Spending40.3

Fiscal Freedom95.5

Regulatory Efficiency

Business Freedom56.9

Labor Freedom73.4

Monetary Freedom70.0

Open Markets

Trade FreedomN/A

Investment FreedomN/A

Financial FreedomN/A

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Quick Facts
  • Population:
    • 33.7 million
  • GDP (PPP):
    • $238.6 billion
    • 8.4% growth
    • 7.1% 5-year compound annual growth
    • $7,080 per capita
  • Unemployment:
    • 16.0%
  • Inflation (CPI):
    • 6.1%
  • FDI Inflow:
    • $2.5 billion
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Iraq remains unranked in the 2014 Index because of the lack of sufficiently reliable data on economic freedom within the country. The Iraqi economy has slowly recovered from the hostilities that began in 2003, but progress has been uneven, and the country faces continuing political and security challenges. Iraq was last graded in the 2002 Index, when it received an overall score of 15.6.

With its economic growth highly volatile, Iraq’s ongoing economic reconstruction, though facilitated by the oil sector and foreign economic aid, has been fragile. Political instability and corruption continue to undermine the limited progress made in past years.

Operating well below potential, the Iraqi economy is burdened by systemic problems. A lack of transparency exacerbates the negative impact on entrepreneurial activity of inefficient business regulations, forestalling the emergence of a dynamic private sector. The economy lacks effective monetary and fiscal policies. The weak state of the financial system, coupled with its limited role within the economy, hampers investment and the everyday operation of businesses.

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Background

Prime Minister Nuri al-Maliki’s Shia-dominated coalition government has lost support among Sunni Arabs and Kurds, who charge that he has adopted a sectarian agenda. The Sunni Arab minority staged a series of protests beginning in 2012 that threatened to devolve into a renewed civil war unless their complaints of marginalization were addressed. Iraq’s state-dominated economy grew by over 9 percent in 2011 and over 10 percent in 2012, propelled by high oil prices and the recovery of the oil industry, which provides more than 90 percent of government revenue. Oil exports rose to 2.6 million barrels per day, a 30-year high. Inadequate infrastructure, weak property rights, bureaucratic red tape, and widespread corruption continue to impede development.

Rule of LawView Methodology

Property Rights N/A Create a Graph using this measurement

Freedom From Corruption 13.7 Create a Graph using this measurement

Corruption is pervasive at all levels of government. There are widespread reports of demands by officials for bribes, mismanagement of public funds, payments to “ghost” employees, salary skimming, and nepotism. Although judicial independence is guaranteed in the constitution, judges are subject to immense political and sectarian pressure and are viewed by the public as corrupt or ineffective. Property rights are not well protected.

Limited GovernmentView Methodology

Iraq’s individual and corporate income tax rates are 15 percent. Oil and gas companies pay a higher rate. Few other taxes exist. The overall tax burden is less than 2 percent of gross domestic income. Public expenditures are over 40 percent of GDP, and public debt is 34 percent of the domestic economy. The government relies heavily on oil revenues.

Regulatory EfficiencyView Methodology

Application of existing regulations has been inconsistent and non-transparent. Starting a new business has become easier, but obtaining operating licenses takes over four months. In the absence of a well-functioning labor market, informal labor activity persists. The state uses oil revenues to subsidize basic services such as water and housing, and total subsidies for oil, natural gas, and electricity equal nearly 20 percent of GDP.

Open MarketsView Methodology

Trade flows remain far below potential as broad-based commercial activity is still suppressed. Numerous non-tariff barriers add to the cost of trade. Iraq is open to foreign investment in principle, but bureaucratic inertia, policy uncertainty, and security concerns deter investment growth. State banks dominate credit markets, and the largely cash-based economy lacks the infrastructure of a fully functioning modern financial system.

Country's Score Over Time

Bar Graph of Iraq Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Iraq to other economic country groups

Regional Ranking

rank country overall change
1Bahrain75.1-0.4
2United Arab Emirates71.40.3
3Qatar71.2-0.1
4Jordan69.2-1.2
5Israel68.41.5
6Oman67.4-0.7
7Kuwait62.3-0.8
8Saudi Arabia62.21.6
9Lebanon59.4-0.1
10Morocco58.3-1.3
11Tunisia57.30.3
12Yemen55.5-0.4
13Egypt52.9-1.9
14Algeria50.81.2
15Iran40.3-2.9


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