Boston, MA -- (SBWIRE) -- 06/06/2014 -- We are maintaining our real growth forecasts for Iraq's construction industry for 2014 at 9.6% year-on-year. Violence in Anbar province and the political turmoil it is causing, in addition to a continued rift between Baghdad and Kurdistan which may delay the next financial year's budget, will act as major drags on growth. That said, Iraq's construction industry has great potential in light of its vast oil reserves and having the fastest growing economy in the Middle East and North Africa. Over our forecast period the oil sector will be a major source of investment into infrastructure, supporting our long-term outlook of 7.2% average real growth over our 10-year forecast period.
Away from the institutional and security risks which will subdue growth in Iraq's construction sector, there are a number of factors which support our view for average year-on-year (y-o-y) growth of 7.2% over the 2014-2023 period. Both the 2013/14 and 2014/15 national budgets have been expansionary, with investment expenditure set to make up the majority of spending; infrastructure and housing accounting for the largest share. While there were delays in passing the previous budget and the most recent budget does not have the approval of the Kurdish, investment in infrastructure is a government priority.
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Endemic problems such as corruption, a lack of institutional capacity and poor technical ability severely dent growth. To address these endemic problems the Ministry of Finance and the Ministry of Planning are looking to tackle the issue of low execution rates by making those with a rate of less than 25.0% liable for questioning by the parliament and the council of ministries. While such moves are encouraging for the construction sector, we believe the government's lack of control over local agencies and bureaucratic bottlenecks will impede the progress of development projects during the forecast period.
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