EBRD Forecasts Iraq Economy to Contract 1.5% in 2026

BAGHDAD, Iraq — LONDON — The European Bank for Reconstruction and Development forecast Iraq's economy will contract by 1.5 percent in 2026, a significant downward revision from its February estimates. The bank said the contraction will worsen from 0.4 percent in 2025 as energy supply constraints and oil export disruptions take their toll. Middle East conflict-driven supply chain disruptions and elevated energy prices are weighing on developing economies, according to the EBRD report. Oil revenues account for more than 90 percent of Iraq's government income, leaving the country exposed to production cuts and export interruptions. The closure of the Strait of Hormuz has disrupted oil transportation, while Iraq's long-standing dependence on natural gas imports from Iran continues to pressure the broader economy. Despite these headwinds, inflation in Iraq remained relatively low at 2.2 percent.