Iraq’s official foreign exchange reserves gained around $six billion in 2010 and they could triple by 2015 if oil prices remain strong and the Gulf country pursued an ambitious crude output expansion plan, according to a Western study.
Iraq’s oil production has already surged by more than 300,000 barrels per day during the first quarter of 2011 and a further rise will ally with high crude prices to boost growth in its real GDP to 11 per cent from only 0.8 per cent in 2010, said the study by the Washington-based Institute for International Finance (IIF).
In nominal terms, the economy of the conflict-battered Arab nation is projected to gain nearly $34 billion in 2011 and could swell further by $13 billion in 2012.
From round 2.36 million bpd through 2010, Iraq’s crude output surged to an average 2.7 million bpd in the first quarter of 2011, IIF said.
Assuming consumption of oil increases by five per cent a year, Iraq’s exports of crude in 2011 are projected at 2.15 million bpd, it added.
The report said the increase in oil production is in response to strengthened global demand occasioned by Libya’s shortfall, adding that it was also supported by three successful bidding rounds held since 2008, which drew in international oil companies to develop or rehabilitate Iraq's vast oil fields.
It noted that Iraq, which controls the world’s third largest proven oil deposits, has set ambitious plans to increase crude output to 11 million bpd by 2020.
But IIF said it believes that target is unlikely to be met, adding that the country’s oil production could gradually rise to around 4.5 million bpd by 2015.
The sharp increase in oil production, combined with higher crude prices, will shift the external current account and fiscal deficits of 2010 to large surpluses of 7.6 and 6.4 per cent of GDP, respectively, in 2011, according to the study.
“Overall, real GDP is projected to grow by 11 per cent in 2011 as a result of the large increase in crude oil production. Growth in nonoil real GDP will depend on improvements in the security situation,” it said.
“If oil prices remain above $100 per barrel, and if the country’s crude production continues to increase over the coming years to about 4.5 million bpd by 2015, then Iraq’s official foreign exchange reserves could almost triple, rising from about $50 billion at the end of 2010 to $143 billion by 2015, equivalent to 78 per cent of projected GDP, or 15 months of import cover.”
The report estimated Iraq’s GDP in current prices at around $80.7 billion in 2010 and expected it to swell to $114.4 billion this year and $127.1 billion in 2012.
It said the surge in real GDP would be mainly a result of higher oil output as hydrocarbon GDP will likely soar by 16.6 per cent in 2011. Non-oil GDP is forecast to rise by nearly 4.5 per cent, it added.
The report put inflation in Iraq at about five per cent in 2010 and forecast it to rise to six per cent in 2011 before edging down to five per cent in 2012.
It expected the country’s external debt to plunge from around 107.7 per cent of GDP in 2010 to 64.2 per cent of projected GDP in 2011 and about 45.8 per cent in 2012. The sharp fall will apparently be due to financial surpluses during 2011-2012 and a surge in the country’s GDP.