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Key developments: The IMF’s October 2026 World Economic Outlook projects a severe contraction for Iraq’s economy in 2026, with a 16% drop in GDP, following a modest 0.4% decline in 2025. Inflation is forecast to climb sharply to 3.5% in 2026 from just 0.3% the previous year, before easing to 3% in 2027. At the same time, the country’s current‑account deficit is expected to widen dramatically to 10.8% of GDP in 2026, before turning into a modest surplus of 2.2% in 2027.
Why it matters: A 16% contraction would be one of the steepest slowdowns among regional oil‑exporting nations, threatening government revenues, public services, and social stability. Rising inflation could erode household purchasing power, while a widening current‑account gap underscores vulnerability to external shocks and the need for fiscal adjustment or external financing.
What to watch next: • Quarterly updates from the IMF and Iraq’s own Ministry of Finance for signs of policy response, such as fiscal consolidation or subsidy reforms.
• Oil price trends, since Iraq’s growth outlook is tightly linked to export earnings.
• Developments in the current‑account balance, especially changes in import demand and remittance flows.
• Early‑year inflation data to gauge whether price pressures intensify beyond the IMF’s estimate. [[1]]