New Construction research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 03/05/2013 -- BMI View: Whilst the Iraqi government continues to focus on rebuilding its infrastructure, we maintain our view that growth in the construction sector will not reach its potential, with average annual growth of 7.8% anticipated between 2013 and 2017. Despite a sizable infrastructure element to the FY2012 budget, and an 18% increase proposed for the FY2013 budget, combined with dedicated infrastructure investment plans, we are not factoring in a full realisation of these plans into our forecast scenario. In order to do so, we would need to see great improvements in political relations, institutional capacity, budget execution rates and regulations.
Iraq's construction sector continues to grapple with the political and economic challenges of a post-war country. Despite a huge project pipeline - with the country attempting to mend its war-torn infrastructure and make up for decades of underinvestment - the business environment, economy and political climate continue to present challenges. The sheer number of projects under way and in the pipeline, including US$35bn in infrastructure alone, and the very low base, is precipitating high growth in the country's construction sector.
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- Budgets: The government has repeatedly announced its intention to focus on infrastructure, especially electricity investments and housing, for which it has handed out multiple contracts. The 2012 budget (passed in February 2012) highlights this focus. The US$100bn budget is 21% larger than the budget of 2011 and includes US$32bn for investment projects. Investment into the electricity sector will increase 31% to US$5.6bn and spending on housing is up 10% to US$976mn. The 2013 budget, for which the first proposal was put forward in October 2012, sees a further 18% growth in spending at IQD138trn (US$118.4bn), with US$47.2bn (equal to 40%) allocated for capital investment.
- Infrastructure allocations are expected to continue to be strong, following the announcement in September 2012 of a US$250-275bn investment plan to take place between 2013 and 2017. With limited details on financing or projects we have refrained from incorporating the announcement into our forecast. It does, however, present upside potential to our outlook over the medium term.
- There is potential for a three-year loan guarantee programme, which would unlock US$30bn in infrastructure investment by providing government sovereign loan guarantees for infrastructure investment. Given the risk associated with investing in Iraq, the offer of loan guarantees would help to unlock the considerable amount of capital looking for higher yield investments in frontier emerging markets.
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