2015 Index of Economic Freedom

Iraq

overall scoreN/A
world rank
Rule of Law

Property RightsN/A

Freedom From Corruption16.0

Limited Government

Government Spending43.8

Fiscal FreedomN/A

Regulatory Efficiency

Business Freedom57.7

Labor Freedom74.4

Monetary Freedom73.6

Open Markets

Trade FreedomN/A

Investment FreedomN/A

Financial FreedomN/A

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Quick Facts
  • Population:
    • 34.8 million
  • GDP (PPP):
    • $257.0 billion
    • 4.2% growth
    • 7.2% 5-year compound annual growth
    • $7,391 per capita
  • Unemployment:
    • 16.1%
  • Inflation (CPI):
    • 1.9%
  • FDI Inflow:
    • $2.9 billion
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Iraq remains unranked in the 2015 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 much of this progress has been patchy or even reversed. The country faces worsening political and security challenges. Iraq was last graded in the 2002 Index, when it received an overall score of 15.6.

A higher degree of political instability and violence has plagued Iraq over the past year and undermined its reconstruction. Endowed with abundant oil wealth, the government has failed to address problems in economic freedom that hold back private-sector development and improvements in productivity.

Inefficient business regulations undermine the entrepreneurial environment, preventing the diversification of the economy away from oil production. Monetary and fiscal policies are poorly enforced, and the government has trouble maintaining proper bookkeeping or budgetary functions. Corruption is endemic and undermines the development of a dynamic private sector. Sectarian favoritism in government bureaucracies leads to arbitrary economic policies that favor particular groups.

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Background

Iraq grew increasingly unstable in 2013 due to the bloody comeback of radical Islamists in the form of the Islamic State in Iraq and Syria (ISIS), the successor to al-Qaeda in Iraq, which spearheaded a Sunni Arab revolt against Prime Minister Nuri al-Maliki’s Shia-dominated coalition government. Maliki, whose party won the largest number of seats in the April 2014 parliamentary elections, alienated Iraq’s Sunni Arabs and Kurds with a heavy-handed sectarian agenda. He stepped down in August in favor of Haider al-Abadi. The oil industry provides more than 90 percent of government revenue. Inadequate infrastructure, weak property rights, bureaucratic red tape, high unemployment, and widespread corruption continue to impede development.

Rule of LawView Methodology

Property Rights N/A Create a Graph using this measurement

Freedom From Corruption 16.0 Create a Graph using this measurement

Until the Islamic State incursion in 2014, the Iraqi state, with its history of authoritarian and intrusive regimes, could be quite efficient at enforcing contracts, albeit through subjective legal processes. Post-ISIS, however, central government control has been weakened, and vested interests and corruption have increased. In such a political environment, 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 corporate tax of 35 percent. There are few other taxes. Taxation remains erratic and poorly enforced. Most government revenue comes from hydrocarbon rents. Government expenditures equal 43.3 percent of domestic output, and public debt is equivalent to 31 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Before the ongoing security turmoil, the business environment, lacking transparency and efficiency, had improved only marginally. The labor market, which had already suffered from state interference and control, has been severely affected by the devastating conflicts. The government uses oil revenues to subsidize basic goods and services and maintains tight price controls on food and medicine.

Open MarketsView Methodology

Iraq’s legal and regulatory regime discourages the free flow of foreign trade and investment. The uncertain security environment also impedes international commerce. Inadequate supervision, political uncertainty, and a lack of security have severely undermined the financial system. Banks suffer from a lack of liquidity. The state has used banks to finance deficit spending and has required loans to state-owned enterprises.

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 Download Charts

Regional Ranking

rank country overall change
1Bahrain73.4-1.7
2United Arab Emirates72.41.0
3Qatar70.8-0.4
4Israel70.52.1
5Jordan69.30.1
6Oman66.7-0.7
7Kuwait62.50.2
8Saudi Arabia62.1-0.1
9Morocco60.11.8
10Lebanon59.3-0.1
11Tunisia57.70.4
12Egypt55.22.3
13Yemen53.7-1.8
14Algeria48.9-1.9
15Iran41.81.5


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