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BMI View: 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, which see the return of fixed
investment in 2017 as the oil price stabilises. 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 of 3.3% forecast for 2016 and 3.6% in 2017 after several years of
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.
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.