The appointment of Mustafa al-Kadhimi (right) as Iraq’s prime minister on 6 May could be a turning point for a country that has relapsed into social and political chaos after two years of recovery.

The challenges facing Iraq’s new prime minister are huge. Anti-government protests calling for an end to the existing political system are widespread. Proxy actions by Tehran and Washington have escalated in Iraq since the assassination of Iranian Revolutionary Guard general Qasem Soleimani on 3 January. 

And, as if that was not enough, Al-Kadhimi must deal with the fallout from the Covid-19 pandemic, which is having a devastating impact on Iraq’s economy.

Rapid decline

It has been a dramatic collapse since mid-2019, when Iraq was emerging as one of the fastest-growing project markets in the region due to an increase in oil and gas, utility capacity enhancement and reconstruction projects.

The Iraq market had been on the rise since February 2018, when international donors pledged $30bn in funding for the country at a reconstruction conference in Kuwait. By May 2020, more than $373bn-worth of projects were planned or under way in Iraq, making it the fourth-biggest market in the region after Saudi Arabia, the UAE and Egypt.

Iraq’s projects are underpinned by strong fundamentals. With more than 38 million people, it is one of the region’s most populous countries. It has the fifth-biggest oil reserves in the world with 147 billion barrels of proven reserves, equal to 8.5 per cent of the world’s oil. It is Opec’s second-biggest producer. And, after decades of sanctions, war and mismanagement, it needs massive infrastructure reconstruction. But to achieve its potential, Iraq needs stability and finance.

Al-Kadhimi’s first leadership challenge is to build consensus support for a new government. His next challenge is to rebuild an economy that has been devastated by Covid-19 and the fall in oil prices.

Iraq is one of the most oil-dependent economies in the region, and government spending will be heavily curtailed by low oil prices. Oil receipts account for approximately 40 per cent of Iraq’s GDP and a greater share still of governments revenue.

The spread of the 2019 novel coronavirus strain (Sars-CoV-2) and resulting Covid-19 pandemic has caused considerable harm to Iraq’s short-term prospects in terms of economic development, government income and project market activity in 2020.

Iraq Projects 2020 provides a comprehensive update on one of the region’s most important markets. It sets out the potential project opportunities, and explains Iraq’s many challenges

Project activity in Iraq has also been impacted by movement restrictions aimed at curbing the spread of Covid-19. The first such chilling effect came in the first few days of February, when Iraq barred Chinese foreign workers assigned to oil projects from re-entering the country.

Across all sectors, there are serious doubts over whether planned projects will advance to the construction stage due to the blanket force majeure declared by Iraq’s pandemic crisis committee in March.

There is no doubt that Iraq can be a high-risk, challenging market. But it offers some of the best potential project opportunities in the region, should the right conditions prevail.

Oil prices are expected to recover once the Covid-19 pandemic passes. The challenge for Baghdad is to provide stability and security. It will require innovative thinking and considerable political skill. Al-Kadhimi’s reputation for pragmatism and his broad support suggest that he is capable of both.

Iraq Projects 2020 provides a comprehensive update on one of the region’s most important markets. It sets out the potential project opportunities, and explains Iraq’s many challenges. Iraq Projects 2020 is an invaluable resource for anyone seeking to do business in Iraq.

REPORT: Iraq Projects 2020

A comprehensive overview and assessment of the projects market in Iraq - with coronavirus update

Click here to buy the report

More from this month's Iraq special report

Government: Protests and proxy wars undermine stability
Defence: Islamic State steps up attacks in Iraq
Economy: Iraq faces financing blackhole after Opec cut deal
Oil: Project activity in Iraq’s oil sector stalls
Subsidies: Lower oil prices force power subsidy rethink
Power: Crisis sets back power programme
Infrastructure: Iraq reconstruction faces familiar challenges
Water sector: Water crisis threatens to deepen