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Key developments: The IMF’s October 2026 World Economic Outlook projects a sharp 16% contraction for Iraq’s GDP in 2026, reversing a modest 0.4% decline in 2025. Inflation is expected to jump to 3.5% in 2026 before easing to 3% the following year, and the current‑account deficit is slated to widen to 10.8% of GDP in 2026 before turning into a 2.2% surplus in 2027. Iraq is among a group of regional oil‑exporting economies forecast to shrink in 2026, with a combined 3.8% regional contraction.
Why it matters: The projected downturn underscores the vulnerability of Iraq’s oil‑dependent economy to global price swings and fiscal pressures. A widening current‑account deficit signals rising import costs and financing strains, while the anticipated inflation surge could erode real wages and consumer spending. The expected rebound in 2027 hinges on higher oil revenues and potential policy adjustments, making the 2026 slump a critical test for fiscal resilience and reform agendas.
What to watch next: • Oil price trends and their impact on Iraq’s export earnings.
• Government budget decisions, especially concerning subsidies and spending cuts.
• IMF‑recommended structural reforms and any policy shifts by Iraq’s finance ministry.
• Regional economic dynamics, particularly the performance of other oil exporters that could influence investor sentiment.
• Updates on the current‑account balance and inflation as the 2026 year progresses. [[1]]