Economy of Iraq

The economy of Iraq is dominated by the oil sector. The IFAD has classified Iraq as an oil-rich upper middle income country. In 2025, the economy is estimated to be at $690 billion (GDP PPP). making it as the fifth largest economy in the Arab world, seventh largest in the Middle East and North Africa and world's 51st largest. It is one of the top five Arab countries with gold reserves and 30th globally.

Iraq experienced economic growth by in the 1970s. Oil industry was nationalized in 1972, followed by a sharp increase in the price of petroleum. Revenue generated from the oil sector were utilized in development and expanding social services, which turned Iraq into a highly developed country. However, the Gulf War and subsequent sanctions drained the country economically. An oil-for-food program by the United Nation, allowed Iraq to sell oil in exchange of humanitarian goods for the civilian population.

Gradually, the economic situation quite improved. Many countries resumed trade with Iraq and the government rebuilt large swaths of country after the war. However, the invasion of Iraq in 2003 and the war damaged much of the country's infrastructure. Although economy expanded rapidly due to privatization, it was interrupted by escalating war. Since 2022, under the leadership of Prime MInister Muhammad Shayya al-Sudani, Iraq has seen a period of relative economic stability.

Iraq is traditionally an oil-rich state, with oil industry being the dominant sector. In 2024, it provided 89% of foreign exchange earning. Crude oil accounts between 92-99% of Iraq's total exports, followed by fruits, aluminum and dates. While import goods include foods, medicine and manufactured products such as ships, automobiles and consumer electronics. Major trade partners of Iraq are the United States, China, India, Greece, Turkey and the United Arab Emirates. Iraq has strong economic and trade ties with numerous countries, with large investments from China and Saudi Arabia.

In the early monarchy era, economic institutions developed slowly. The Iraqi economy was largely market-oriented, but based more on feudal and traditions rather than on modern principles. King Faisal, the first king of Iraq, laid foundations for the modern Iraqi state. Under his rule, an oil pipeline was built between Kirkuk and Haifa. Then finance minister Sassoon Eskell was instrumental in forming Iraq's financial system and oil industry.

A development board was established in 1950. The board regulated five-year plans that emphasized three priorities—agriculture, transportation and communication and construction. The agriculture part also included irrigation and flood control. The board was well-received by the commentators for using most of the country's oil income for capital investment and infrastructure development. It also received criticism for over-emphasizing agriculture and ignoring industry and human resources, which would have appealed to two increasingly important constituents—educated elites and workers. Neglecting these groups became one of the minor reasons which provoked the coup in 1958.

During its modern history, the oil sector has provided about 99.7% of foreign exchange earnings. Agrarian economy underwent rapid development following the 14 July Revolution in 1958. It had become the third-largest economy in the Middle East by 1980. This occurred in part because of the industrialization and infrastructure development initiatives led by Saddam Hussein, which included irrigation projects, railway and highway construction, and rural electrification. In the 1980s, financial problems caused by massive expenditures in the Iran-Iraq War and damage to oil export facilities by Iran's military led the government to implement austerity measures, to borrow heavily, and to later reschedule foreign debt payments.

Nominal GDP grew by 213% in the 1960s, 1325% in the 1970s, 2% in the 1980s, −47% in the 1990s, and 317% in 2000s. Real GDP per capita (measured in $1990 ) increased significantly during the 1950s, 60s and 70s, which can be explained by both higher oil production levels as well as oil prices, which famously peaked in the 1970s due to the OPEC's oil embargo, causing the 1973 oil crisis. In the following two decades, however, GDP per capita in Iraq dropped substantially because of multiple wars, namely the 1980-88 war with Iran, the 1990-1991 Gulf War.