Question

Impact of covid-19 on Iraq Economy and mention the measures of government action taken to step-up the economic growth of Kurdistan region. (1000 word, with Reference)

Answer 1

A new International Organization for Migration (IOM) report sheds light on the negative impact the coronavirus has had on the Iraqi economy. The intergovernmental organization said that restrictions aimed at curbing the spread of the pandemic will continue to hurt small and medium-sized businesses in Iraq.

“The already dire situation is likely to deteriorate and become even more challenging for job and economic opportunity creation,” the IOM Saif in the report. “Livelihoods have been widely disrupted across the country, driven primarily by movement restrictions."

The IOM is a “related organization” of the United Nations and works closely with the international body on migration and displacement issues. Its Enterprise Development Fund supports job creation and economic growth in Iraq. The country hosts more than a million internally displaced persons and refugees. The fund was responsible for the report.

Iraq went into a lockdown in March when its number of confirmed coronavirus cases was still relatively low. Only essential businesses like supermarkets and pharmacies remained open. The country then eased restrictions in late April. Late last month, Iraq returned to a full lockdown after a surge in cases.

The report based its findings on data collected in April from small and medium-sized enterprises in the manufacturing, food, retail, service and other sectors. Small and medium-sized enterprises are independent firms that do not rely on subsidies and have a few hundred employees or less.

Across all economic sectors, sales went down by 71% and employment reduced by 40% for these businesses in Iraq. Salaries also reduced by 36%, according to the report.

The economic damage varied by region. For example, the average loss of weekly revenue for businesses was $6,045 in the capital Baghdad. In the northern Diyala province, this figure was only $756, according to a map of the data from the Enterprise Development Fund.

Coronavirus cases are climbing in Iraq by about 1,000 a day now. The latest figures from the Iraqi Ministry of Health put the total number of cases recorded in Iraq at 16,675. This means the economic damage could continue for months or longer.

Many Iraqis oppose the virus restriction measures, despite the rising cases. The autonomous Kurdistan Region of Iraq recently lifted a reimposed lockdown following protests throughout the region by people who demanded to return to work.

The research aims to provide insights and recommendations to tackle the challenges and opportunities that currently face the various segments of the Iraqi market. This will aid governmental organizations and authorities in devising effective policies to make a faster economic recovery.

Our team studied the magnitude of the current economic crisis resulting from plummeting oil prices and the preventive measures taken against the virus. The research surveyed over 500 people from various professional backgrounds such as public and private sector employees and business owners. Also the research includes insights from experts from a range of fields such as finance, economy, construction and business development.

The study discusses attitudes towards the financial situation and the extent of the impact on different sectors such as, Energy sector, Travel sector, E-commerce, Banking system etc.

• are considered to be in a better financial position while a heavier toll was inflicted on private sector employees.
• Over 40% of employers believe that 1-3 months will be needed to recover from the crisis and 50% of employers believe that zero interest loans could help in a faster recovery.
• 90% of e-commerce and delivery services were paralyzed due to the curfew imposed.
• Around 70 private bank activities have been limited due to government debt, and shortage in liquidity affecting revenue, deposits, and profits.

KAPITA's research team deeply thanks and appreciates its partners who majorly contributed to the completion of this study. We sincerely thank Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) for being an outstanding enabler for us, Iraqi Innovation Alliance (IIA) for their contribution in data collection and Iraq Business News (IBN) for being our media partner.

We would like to thank all the people who filled out the survey and contributed to the shaping of this study to highlight the impact of the COVID-19 crisis on Iraq's economy.

KAPITA's research team would like to express its deep gratitude to the interviewees for their help in making this research possible (The following order is the order of the interviews):

1. Ammar Al-Khatib, Executive Director of The Station
2. Anas Morshed, Economics Blogger & Business Development Consultant
3. Mahmoud Al-Daghir, Former Director General of Financial Operations and Debt Management, Central Bank of Iraq (CBI)
4. Samir Al-Nosery, Banking & Economics Consultant
5. Tamara Hussein, Head of Traders at Rabee Securities
6. Omar Salam, Secretary-General of Engineers Syndicate
7. Abdul Ghani Al-Hassani, Financial Expert & Investment Manager at GroFin
8. Ayser Jabbar, Media manager of the Central Bank of Iraq (CBI)
9. Hyder Zahid, Financial Advisor at PMO
10. Ali Sabeh, President of the Iraqi Federation of Industries
11. Hamid Ridha, Owner and CEO of Royal Nuts Company.
12. Mustafa Sirri, Business Environment and Policy Development Advisor in the PSD project of GIZ
13. Zuhair Sabri, Secretary-General of the Iraqi Contractors Federation
14. Ahmed Tabaqchali, Senior Fellow at the Institute of Regional and International Studies (IRIS)
15. Alaa Jassim, Vice President of Eartblink.

    

    OECD Policy Responses to Coronavirus (COVID-19)

    Evaluating the initial impact of COVID-19 containment measures on economic activity

    Open PDF  Updated 10 June 2020ncreasing spread of the coronavirus across countries has prompted many governments to introduce unprecedented measures to contain the epidemic. These are priority measures that are imposed by a sanitary situation, which leave little room for other options as health should remain the primary concern. These measures have led to many businesses being shut down temporarily, widespread restrictions on travel and mobility, financial market turmoil, an erosion of confidence and heighted uncertainty.

16. In a rapidly changing environment, it is extremely difficult to quantify the exact magnitude of the impact of these measures on GDP growth, but is clear that they imply sharp contractions in the level of output, household spending, corporate investment and international trade. This note provides illustrative estimates of the initial direct impact of shutdowns, based on an analysis of sectoral output and consumption patterns across countries and an assumption of common effects within each sector and spending category in all countries.

17. This approach suggests that the initial direct impact of the shutdowns could be a decline in the level of output of between one-fifth to one-quarter in many economies, with consumers’ expenditure potentially dropping by around one-third. Changes of this magnitude would far outweigh anything experienced during the global financial crisis in 2008-09. This broad estimate only covers the initial direct impact in the sectors involved and does not take into account any additional indirect impacts that may arise.

18. These are only the initial impacts on the level of output. The implications for annual GDP growth will depend on many factors, including the magnitude and duration of national shutdowns, the extent of reduced demand for goods and services in other parts of the economy, and the speed at which significant fiscal and monetary policy support takes effect. Nonetheless, it is clear that the impact of the shutdowns will weaken short-term growth prospects substantially.

19. The scale of the estimated decline in the level of output is such that it is equivalent to a decline in annual GDP growth of up to 2 percentage points for each month that strict containment measures continue. If the shutdown continued for three months, with no offsetting factors, annual GDP growth could be between 4-6 percentage points lower than it otherwise might have been.

20. These estimates are one approach to quantifying the initial impact of containment measures on activity, and do not utilise the full range of data that inform the projections of economic growth in the OECD Economic Outlook. However, their message of sharp initial declines in activity across countries following shutdowns and restrictions on mobility is very similar to that emerging from business surveys, high-frequency daily indicators, and the sharp output contraction observed already in China this year.

    Considerable uncertainty remains about the duration and magnitude of confinement measures and the extent to which they may be implemented in a similar manner across countries. Even once they begin to be eased, the extent of any subsequent recovery in output will depend on the effectiveness of the policy actions taken to support workers and companies through the downturn and the extent to which confidence returns.