2019 Index of Economic Freedom

Iraq

overall scoreN/A
world rank
Rule of Law

Property Rights37.0

Government Integrity20.3

Judicial Effectiveness12.3

Government Size

Government Spending52.8

Tax BurdenN/A

Fiscal Health13.3

Regulatory Efficiency

Business Freedom54.4

Labor Freedom53.1

Monetary Freedom81.4

Open Markets

Trade FreedomN/A

Investment FreedomN/A

Financial FreedomN/A

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See how Iraq compares to another country using any of the measures in the Index.

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Quick Facts
  • Population:
    • 38.9 million
  • GDP (PPP):
    • $658.8 billion
    • -0.8% growth
    • 4.7% 5-year compound annual growth
    • $16,954 per capita
  • Unemployment:
    • 8.2%
  • Inflation (CPI):
    • 0.1%
  • FDI Inflow:
    • $-5032.4 million

Iraq is not ranked in the 2019 Index because of the lack of reliable relevant data. Iraqi forces have territorially defeated the Islamic State, but ISIS remains a terrorist threat. The outlook for the country depends mainly on whether the government is able to reduce social unrest, resolve its dispute with the Kurds, and prevent the return of Islamic State influence.

Economic policy priorities include reining in fiscal spending, curbing corruption, improving fiscal management, and strengthening the financial sector. Rising prices should boost the economy, which is largely dependent on the oil sector, but production will remain constrained by lack of investment. Combatting corruption and reducing government spending will be politically challenging; civil service positions are used to reward loyal political allies. Diversification, key to Iraq’s long-term economic development, will require a strengthened investment climate to bolster private-sector engagement, which in turn will require improving the security environment and restoring the rule of law.

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Background

Iraq is slowly recovering from the traumatic 2014 war against the Islamic State (ISIS) in Western Iraq. Prime Minister Haider al-Abadi, who replaced the discredited Nuri al-Maliki in 2014, received much of the credit for defeating ISIS, but his party did poorly in the May 2018 parliamentary election, and he may not be included in the next government. That election increased the power of populist firebrand and Shia cleric Moqtada al-Sadr. Iraq’s state-dominated economy is led by the oil sector, which provides about 85 percent of government revenue. The war against the Islamic State imposed a high cost on the economy, which also has been hurt by rampant corruption, sluggish oil prices, and war-damaged infrastructure.

Rule of LawView Methodology

Property Rights 37.0 Create a Graph using this measurement

Government Integrity 20.3 Create a Graph using this measurement

Judicial Effectiveness 12.3 Create a Graph using this measurement

The state’s limited administrative capacity leaves property rights unprotected. 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 efforts to combat corruption are met with resistance and threats. Bribery, money laundering, nepotism, and misappropriation of public funds are common.

Government SizeView Methodology

Individual and corporate income tax rates are capped at 15 percent. Because of high levels of evasion and lax enforcement, tax revenue as a percentage of GDP is negligible. Over the past three years, government spending has amounted to 39.7 percent of the country’s output (GDP), and budget deficits have averaged 9.5 percent of GDP. Public debt is equivalent to 58.0 percent of GDP.

Regulatory EfficiencyView Methodology

The absence of efficient regulatory policies makes development of a much-needed dynamic private sector extremely difficult. 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. Iraq has some of the world’s highest subsidy rates, with subsidies amounting to about 40 percent of GDP.

Open MarketsView Methodology

The combined value of exports and imports is equal to 73.9 percent of GDP. Judicial and regulatory system problems deter foreign trade and investment. 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 frameworks have not strengthened enough to deepen financial intermediation.

Country's Score Over Time

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Regional Ranking

rank country overall change
1United Arab Emirates77.60.0
2Israel72.80.6
3Qatar72.60.0
4Jordan66.51.6
5Bahrain66.4-1.3
6Morocco62.91.0
7Oman610.0
8Kuwait60.8-1.4
9Saudi Arabia60.71.1
10Tunisia55.4-3.5
11Egypt52.5-0.9
12Lebanon51.1-2.1
13Iran51.10.2
14Algeria46.21.5


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