Despite a 10% increase in the money supply, warnings are being issued about “stagnation and hoarding” threatening Iraq’s private sector.
Despite a 10% increase in the money supply, warnings are being issued about “stagnation and hoarding” threatening Iraq’s private sector.
2026-08-11
Shafaq News – Baghdad
Economic expert Manar Al-Obaidi warned on Tuesday of indicators of stagnation in non-oil GDP and an increase in the money supply in the country, and the resulting negative repercussions on the private sector and the lack of job opportunities in it, calling for the provision of urgent stimulus packages for the commercial and industrial sectors by facilitating the business environment and granting tax and customs exemptions.
In an economic analysis received by Shafaq News Agency, Al-Ubaidi stated, “The Iraqi economy is currently facing a clear paradox; despite the money supply increasing by nearly 10% since the beginning of this year, inflation rates have remained stable at 3%.” He added that this stability, despite its seemingly positive appearance, leads to two economic interpretations that reflect a worrying reality:
First possibility: Non-oil GDP stagnation
The stability of inflation is likely due to a significant slowdown in non-oil GDP, which counteracted the effect of the increased money supply, signaling that the Iraqi economy had entered a recession that absorbed the shock of inflation.
Al-Ubaidi explained that this indicator is extremely dangerous because it directly reflects the decline in job opportunities in the private sector, especially in the “trade sector” – the third largest contributor to the GDP after oil and the government sector – which was severely affected by the application of the ASYCUDA system, the increase in customs tariffs, and logistical problems in transportation and shipping. This contraction was clearly manifested in the decline in sales of the Central Bank of Iraq by 41% compared to the previous year.
The second possibility: a decrease in the velocity of money (hoarding).
This is manifested in the slowdown of the money cycle within the economy as a result of market fears of a lack of liquidity in the government sector, which has led to a significant increase in the phenomenon of “hoarding” and the conversion of a large part of the issued money mass into frozen funds outside the economic cycle.
The economist stressed that maintaining low inflation rates is crucial to protecting vulnerable groups, provided that this is not at the expense of the private sector, which is the main driver of job creation. He expressed regret for the lack of accurate data measuring the extent of the decline in business activity and levels of demand for jobs.
Al-Ubaidi concluded that the primary objective should focus on maintaining a targeted inflation rate without stifling the private sector, stressing that the Iraqi economy is in dire need of urgent stimulus packages for the commercial and industrial sectors, because GDP growth and getting the economy moving are far more important than pursuing hypothetical tax and customs revenues that will not be achieved in light of the paralysis of commercial activity.
shafaq.com
