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Iraqs Economy to Grow 6%
05/09/2007

Improved security is boosting Iraq's war-ravaged economy which is heading for growth of more than six percent this year, a senior US official said on Wednesday, supporting IMF projections.

"The improvement on the security side is having an impact on the economy," Charles Ries, the US coordinator for economic transition in Iraq, told reporters in Baghdad, referring to claims by the US military that its troop "surge" is reining in sectarian violence.

"It is hard to measure it precisely, and there is no doubt that the Iraqi economy is burdened by a number of challenges and is performing under its potential," said Ries, who took up his post in July.

"Nonetheless, real GDP growth this year will be over six percent and if you take out the oil sector, it will be over seven percent."

According to the International Monetary Fund, Iraq's gross domestic product rose by 3.7 percent in 2005 and an estimated 6.2 percent in 2006.

It projects that to rise to 6.3 percent this year but warned in a report last month that growth had been slower than expected "mainly because the expected expansion of oil production has not materialised."

Crude output has remained static since 2004 at about two million barrels per day, the IMF said.

But Ries said he believed the oil sector was poised for take-off once a new oil and gas law has been submitted to parliament for approval later this month.

The legislation -- seen by the US as a key benchmark to measure political reconciliation in Iraq -- will open up the hydrocarbons sector to foreign investors and allow world energy companies to help find new oil and gas resources.

Iraq has the world's third-largest proven oil reserves, with much of the country still unexplored. What deposits have been discovered are usually close to the surface and comprise sweet crude, which can be pumped and refined more cheaply than in other countries.

According to Ries, international investors are beginning to "take a new look" at Iraq.

He said the most significant economic development this year was a 3.75 billion dollar investment by three international companies -- none of them American -- in Iraq's rapidly expanding mobile telephone sector.

He hailed it as "a really quite remarkable manifestation of confidence in the Iraqi economy."

He said the agricultural sector remained "rich", accounting for around 20 percent of the economy.

But he acknowledged that industry was stagnant, transport needed massive cash injections and the electricity supply was hopelessly inadequate.

Take away foreign assistance, including 30 billion dollars from the United States since 2003, and the GDP figures would look quite different.

"Foreign assistance from the the United States and other countries do play an important stimulatory role in the economy," acknowledged Ries, adding however that trying to measure the extent of this would be a "guestimate."

The IMF in its August report listed other economic defects -- annual consumer price inflation was running at around 46 percent in June and there are frequent shortages of fuel products.

But the IMF directors commended the Iraqi authorities "for keeping their economic programme on track by strengthening economic policies and making progress in structural reforms, despite an unsettled political situation and a very difficult security environment."

Ries said the focus now was to ensure that there is "sustained and sustainable economic activity" in areas made safe by the US troop surge.

"The people in this country have suffered so much from war and insurgency, they need to see a noticeable difference when peace comes back."

Iraqs Economy to Grow 6% -  Source


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