The Rise of ISIS
The shrinking economy in Iraq is nothing in comparison to the 41.4% plunge in output the country experienced in 2003, when America invaded the country to overpower the government of its former leader, Saddam Hussein. In the summer of this year, the Islamic State of Syria and Iraq (ISIS) pushed through northern Iraq with little to no resistance from the pitiful government troops who chose not to fight for their own country. Following this, the offshoot of Al Qaeda known as ISIS (just mentioned) declared a caliphate within parts of Iraq and Syria and were threatening to take Bagdad.
Iraq's Growth and Oil Production
Various conflicts within Iraq have led to brief stoppages of oil production in the country, expected now to be approximately 2.9 million barrels per day (mbd). On the other hand, the export of 2.4 mbd should remain relatively close to the levels of last year according to the International Monetary Fund (IMF).
Furthermore, the non-oil based GDP growth is also likely to see negative movement this year, in comparison to growth of over 7% experienced in 2013. This is because of the fighting that has disrupted the regular supply of electricity and fuel, weakening project investment, and increasing distribution and trade costs.
Despite all of this hardship, however, experts suggest that GDP growth may pick up again in 2015, to a modest 1.5%. This rise is likely driven by an oil output increase, according to the IMF. The longer-term projection for crude oil output, however, is lower at 4.4 mbd in 2019, down from 5.6 mbd.
Currently, the IMF has recognized that the budget for the country's government is under significant pressure when it comes to relieving the humanitarian crisis and improving its security spending.
The Iraq military just gave ISIS millions of dollars in hardware that America left for it. Yes, Iraq has many problems and fighting for its survival is one of them.
The Future of Iraq
The IMF estimated a break-even oil price of $111.20 a barrel in 2014, which is higher than last year's $106.10. Recently, Brent crude oil fell to approximately $85 a barrel, increasing Iraq's economic growth concerns. Despite this, the IMF is hoping for a higher oil output of 3.0 mbd in 2015, forecasting a fiscal gap of 0.6% of GDP for 2015. More oil online is better for the world. More supply means cheaper prices!
If the fighting was to overwhelm the south and Bagdad, however, oil exports could drop further, perhaps amounting to 1.5% of global consumption. This may not happen though because the Republicans took over the senate and they are the ones who care about America's interests. Stopping ISIS is an American interest.
original source: http://www.economywatch.com/news/Iraqi-Economy-to-Shrink-for-the-First-Time-since-the-War.11-14-14.html