Iraq Infrastructure Report Q3 2016 - New Study Released

The dire security situation and virtually non-existent public spending will deter investment in Iraq's construction sector in the near term . On a positive note, FDI is being promised for the future, especially in its hydrocarbons industry and gas pipeline infrastructure . Meanwhile, the project pipeline remains swollen with large residential developments, but the investment and operating environment make it exceptionally challenging to conduct business .

Latest Updates And Structural Trends

Security and macroeconomic headwinds facing the industry are still firmly in play. Our short-term view remains unchanged with growth in 2016 forecast of 3.3% after several years of contraction.

Long-term growth of a forecast 4.7% annually to 2025 is far below the country's potential, given the need for major reconstruction after years of war. In January 2016 Baghdad cancelled projects worth IQD10tn (USD9bn) and postponed another 2,169 projects worth IQD37tn that had been approved in the 2015 budget as the government faces a severe fiscal crisis brought about by a drastic fall in its oil revenues.

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The Iraqi government also announced in January it would not approve projects in 2016.

Nevertheless, our core view is for oil prices to rise from H216, with Iraq making gains against Islamic State forces and the economy to begin slowly improving, which could set in motion a return of investment and activity in the construction sector from 2017.

Risk/Reward Index

We have significantly revised downwards our BMI Infrastructure RRI for Iraq over the past year, largely due to deteriorating Industry Rewards and Country Risks scores.

The many downside risks facing the country are exacerbated by the rise of the Islamic State (IS) and strikes targeting infrastructure.

The overall score of 41.1 remains unchanged this quarter, but Iraq stays firmly in the bottom half of the table of 14 countries in our Middle East and North Africa (MENA) regional index.

Project delays, false starts, political divisions and security risks will all weigh on Iraqi construction industry growth forecasts over the medium term (2015-2019) at least.

The Iraq Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.

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