An Overview of Iraq's Economy

Even more than its neighbor Iran, Iraq's economy is dependent on one resource: oil.

Oil reserves account for 95% of the country's total foreign exchange earnings, according to Wikipedia. Iraq also exports food and live animals. Besides the U.S., its main trading partners are Syria, Turkey, Jordan, Italy, India and China. However, the country is ranked a dismal 166th in the world when it comes to ease of doing business, according to the World Bank. This is largely due to issues with security and political corruption in the aftermath of the occupation.

During the 1970s, Iraq made impressive advancements in industry and agriculture, making it an economic leader in the region. However, the massive expense and debt of waging a decade-long war against Iran took a toll on Iraq's finances, and the sanctions imposed by the UN after Saddam Hussein's subsequent invasion of Kuwait made the country's economic situation even more difficult.

During the sanctions, Iraq was only able to import medicine and an emergency supply of food. When the sanctions were lifted in 2003, Iraq's economy immediately grew by 53%.

Iraq's currency is the dinar, which currently trades at about 1,160 to the dollar. In spite of having the world's fourth largest oil reserves, Iraq's GDP is only 65th in the world, according to the CIA Factbook. It is only 11th in the world when it comes to exporting oil, meaning that there is a large gap between Iraq's oil production potential and what its petroleum industry is currently able to accomplish.

Natural gas may be an even bigger untapped market for Iraq. In spite of having the world's 11th largest natural gas reserves, it exports no natural gas at all, at least according to the 2008 data.

Business Week has an informative article on the slow regrowth of Iraq's economy. Its banking sector is getting stronger, despite the draconian security measures that must be imposed in banks in order to guard against attacks. Its retail sector is also growing, and imports from around the Arab world are readily available. There are also privately owned TV networks, though frequent blackouts and electricity shortages make watching TV difficult in many parts of the country. Overall, if security remains decent and foreign investment continues to flow into Iraq, the country's economic prospects are on track to greatly improve in the coming decade.