From growth to contraction: IMF's stark outlook for Iraq's economy

Shafaq News/ Iraq’s economy, once projected to grow, is now on course to shrink by 1.5% in 2025—a sharp reversal driven by falling oil prices and waning global demand, the International Monetary Fund (IMF) revealed Tuesday.

The IMF expects, however, a modest rebound in 2026, with growth forecast at 1.4%, according to its April World Economic Outlook.

This marks a steep downgrade from October 2024, when the Fund had projected 4.1% growth for Iraq in 2025.

Oil the Culprit

Oil generates over 90% of Iraq’s state revenue, leaving the country highly exposed to market volatility.

Brent crude recently sank to a four-year low, as trade tensions between the United States and its partners stirred fears of declining global demand.

Compounding the pressure, OPEC+ announced a production increase of 411,000 barrels per day in May, consolidating three months of planned hikes.

Iraq plans to cut exports by 100,000 barrels per day in response to calls for quota compliance, bringing the average to 3.2 million, Bloomberg reported, citing an unnamed official.

The IMF estimates Iraq needs oil to average $92 per barrel this year to meet its budget needs, yet Brent is currently trading near $65.

Prices are projected to average $66.9 per barrel in 2025—down 15.5% from last year—and fall further to $62.4 in 2026.