Thursday, August 16, 2007

Iraqi growth slower than expected

15th August 2007

The Iraqi economy has been growing at a much slower pace than expected, a new report has found.

The Iraqi economy grew by just 6.2 per cent in 2006

The Iraqi economy grew by just 6.2 per cent in 2006

The International Monetary Fund (IMF) study blames this on an expected expansion in oil production that failed to materialise.

"Economic growth has been slower than expected at the time of the last Article IV consultation, mainly because the expected expansion of oil production has not materialised," the IMF said.

Average annual crude oil production has remained at just 2 million barrels per day since 2004, the report revealed.

Iraq's gross domestic product (GDP) should reach 6.3 per cent in 2007, up slightly from the 6.2 per cent rate recorded last year.

But the report also highlighted some encouraging points for the troubled Iraqi economy.

The Central Bank of Iraq (CBI) has successfully brought consumer price inflation (CPI) under control.

CPI stood at 46 per cent in June, down from 65 per cent at the end of 2006.

Since last November, the CBI has allowed the exchange rate of the Iraqi dinar to appreciate by 15 per cent and has raised its key interest rate twice so it currently stands at 20 per cent.

In addition to reducing inflation, these policies have also had some success in de-dollarising the economy and increasing the demand for dinars.

The CBI gross international reserves increased to $18.7bn at the end of 2006.

"Despite an unsettled political situation, capacity constraints, and the deterioration in security in 2006, progress has been made in implementing structural reforms, although much remains to be done," the report concluded.


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