Monday AM Iraq Economy News Highlights 6-13-22

The General Budget: Half A Year Passes, And There Are No Signs Of Passing The Law

Sumerian special  2022-06-13 | 04:53   Source:  Sumerian  153 views  Half a year passes, and there are no signs of passing the law, and there are fears of an economic crisis.  At the end of the political bloc's priorities list is the state budget, as its delay leads to the disruption of many sectors, a matter that needs to favor the public interest and leave the rivalries to pass such important laws.

Representatives in Parliament believe that it is necessary to establish a general rule for drafting the budget law and to pass it away from political conflicts.

The fact that Iraq remains without a financial budget despite the expiration of the current half year raises many questions and concerns. The current government is unable to pass the law, and waiting for the formation of a new government may be prolonged amid ongoing disputes that have negative repercussions on the citizen. LINK

When Inflation Meets Economic Stagnation

Dr.. Abdullah Al-Radadi, a Saudi researcher specializing in financial management

The media circulated the term (stagflation), which means stagflation, a term coined to be synonymous with double price increases, job losses, and images of cars queuing at gas stations. While the term refers to a sharp increase in prices with job losses, economists have used the term more broadly to refer to a period in which inflation remains above central banks' target, with negative effects on economic growth.

The World Bank gave a dark picture of the global economy in the coming period in its report issued last week, and the Bank expected that global growth would decline to 2.9% in 2022, after it reached 5.7% in 2021, and the level of per capita income in developing economies is expected to decrease this year. by 5%.

In advanced economies, growth is expected to slow from 5.1% to 2.6%, while in developing and emerging economies, growth may decline from 6.6% to 3.4%, which is much lower than the average of the past decade, which reached 4.8%.

The World Bank expected that inflation will decrease next year, but it will remain higher than the inflation targets in many countries, and the continuation of inflation may lead to a contraction of the global economy.

High rates of inflation harm the economy because it puts pressure on the budgets of individuals and families, which makes them reduce consumer spending, which weakens economic activity and slows down the growth of companies (if they grow), as well as the decline in their profits.

This is the sharpest inflation in four decades, which made many compare it to the recession that occurred in the United States in the seventies of the last century, when unemployment rates doubled in the United States and Europe, and inflation then reached 14%.

This situation is similar to the seventies in three main aspects: The first is the continuous disturbances on the supply side, which clearly fuels inflation. This shortage has been represented in a number of forms, including the pandemic and how it has affected global supply chains, the closest example being the lack of electronic chips.

The energy supply was also disrupted by the Russian-Ukrainian war. Perhaps what made many associate this time with the seventies is the lack of oil supplies at that time due to the embargo of a number of Arab countries for oil. This turmoil is similar to what the Russian-Ukrainian war caused a shock to global energy markets.

The second reason for the analogy with the seventies is the accommodative monetary policy that followed the pandemic to revitalize advanced economies, so many countries facilitated loans by reducing interest rates to revitalize the economy after the pandemic, and this contributed to increasing inflation. The third is the fragility of some emerging markets, which were greatly affected by the tightening of monetary policy and raising interest rates.

The reason for optimism is that the central banks have benefited from the lessons of the seventies, as they now have a clear target for inflation, unlike the seventies, and are seeking to reach these targets through their monetary policies. In addition, governments have become more able to contribute to reducing unemployment rates by creating investments to provide jobs. Governments are ready to struggle so as not to reach the situation in the seventies, when many countries entered into cycles for many years, some of which have not yet been able to get out of it.

Reducing inflation pressures may lie in two main solutions: The first is to solve supply chain obstacles, which reduces costs on products, food and fuel and makes them more abundant, and therefore less expensive. The solution to these obstacles does not appear on the horizon yet.

China is still suffering from the outbreak of the Corona virus, and the shortage of manpower continues to pose a challenge to ports and warehouses. Therefore, the central banks resorted to the other solution, which is raising the interest rate to reduce demand from companies and consumers.

So far, the Federal Reserve has raised the target interest rate twice, and announced it will raise it for a third time a few days ago, and it is not unlikely that it will raise it twice more by the end of this year.

Although it is a proven solution to control the price of inflation, raising the interest rate in this way may cause the elimination of growth and lead to stagnation, a dilemma that may be difficult for some governments to solve.    https://economy-news.net/content.php?id=28445

An Expert Reviews The Fate Of Oil Prices: Artificial Prices Will Drop Soon

2022-06-13   Yes Iraq: Baghdad   The oil expert, Nabil Al-Marsoumi, revealed that the current high oil prices are “artificial” and not real, and will soon drop, expecting prices to drop to less than $100 in the first quarter of next year.

Al-Marsoumi said in a clarification followed by “Yes Iraq”, that “the excess production capacity of crude oil in the OPEC Plus countries that can be exploited within 3 months amounted to 6.930 million barrels per day at the end of the first quarter of 2022.”

He added, "With the exclusion of Russia and Iran due to the inability to exploit their spare capacity due to Western sanctions on them, the net surplus production capacity in the OPEC Plus countries drops to 4.550 million barrels, including 1.840 million barrels per day in Russia, 1.090 million barrels in the UAE and 400 thousand barrels per day in Iraq." “.

He explained, "With the end of OPEC Plus restrictions on production next September, it is possible to convert this surplus capacity into actual production that compensates for the lost Russian oil and contributes to increasing the oil supply and putting pressure on prices, and this reinforces expectations of a decrease in global economic growth from 5.7 percent in 2021 to 2021." 3% in 2022 and rising global inflation levels.”

He considered that, “This means that the current high oil prices are artificial because they are linked to the Russian-Ukrainian war without being supported by the market fundamentals represented by the forces of supply and demand, and this may push oil prices down in the last quarter of this year, and prices may drop below the level of $100 per barrel.” in the first quarter of next year.   LINK

Despite Attempts To Find Alternatives, Oil Is Still The Backbone Of Iraq's Economy

Shafaq News/ Financial oil imports still constitute the main and highest source of supplying the Iraqi state, despite governments' attempts to secure other sources of income, and the advice of economic experts to find economic alternatives to black gold.

According to the data and tables issued by the Ministry of Finance to the accounts of the Iraqi state for the month of last April, which were reviewed by Shafak News Agency, oil still constitutes the main resource for the general budget, reaching 96%, which is the same percentage for the month of last March, which indicates that the rentier economy is the basis in the budget.

Through the financial tables, it appears that the total oil revenues for the month of April amounted to 45 trillion and 72 billion and 503 million and 873 thousand and 432 dinars, which represents 96% of the total revenues, while the total non-oil revenues amounted to two trillion and 57 billion and 213 million and 741 thousand and 41 dinars, which constitute 4 % of total revenue.

The total oil and non-oil revenues amounted to 47 trillion and 129 billion and 717 million and 614 thousand and 614 dinars, which is 88% higher than the same period last year 2021, which amounted to 24 trillion and 994 billion and 967 million dinars as a result of high oil prices.

According to the finance report, the current revenues for the month of last March came from oil exports and mineral wealth by 44 trillion and 791 billion and 6 million and 778 thousand and 297 dinars.

While income and wealth tax revenues amounted to 449 billion and 136 million and 784 thousand and 800 dinars, and also came from commodity taxes and production fees at 366 billion and 557 million and 309 thousand and 65 dinars, and fees amounted to 384 billion and 314 million and 105 thousand and 407 dinars.

The share of public sector profits amounted to 324 billion and 595 million and 235 thousand and 902 dinars, while the transfer revenues were 438 billion and 610 million and 457 thousand and 958 dinars, and other revenues amounted to 348 billion and 142 million and 686 thousand and 359 dinars, and capital revenues also amounted to 27 billion and 354 million and 256 thousand and 685 dinars. dt.

For his part, the financial advisor to the Prime Minister, Mazhar Muhammad Salih, revealed in an interview with Shafak News Agency, the reasons for the high percentage of oil contribution to the federal budget at the expense of non-oil revenues.

He said that "due to the global food crisis and the rise in fuel prices, the state has zeroed customs revenues and postponed tax revenues for a period of six months, which led to a decrease in the proportion of non-oil revenues in the general budget."

He pointed out that "non-oil revenues in Iraq historically constitute between 7 to 10 percent."

Saleh added, "The government's support for prices to confront the food and imported fuel crisis was the reason behind this. The tax-exempt imported commodity deprived the state of non-oil revenues," noting that "non-oil revenues mostly come from customs and taxes."

He pointed out that "the increase in oil revenues as a result of a significant increase in its prices is another reason for the increase in the proportion of oil revenues at the expense of non-oil revenues," stressing that "this percentage is considered normal."

The Prime Minister's Adviser for Financial Affairs, Mazhar Muhammad Salih, had confirmed in March 2021 in an interview with Shafaq News Agency, "The reasons for the economy remaining rentier are due to wars and the imposition of economic blockades during the past era and the political conflicts we are witnessing today, which led to the dispersal of economic resources."

The continuation of the Iraqi state to rely on oil as the only source of the general budget makes Iraq at risk from the global crises that occur from time to time due to the impact of oil on it, which makes Iraq tend every time to cover the deficit through borrowing from abroad or inside, which thus indicates the inability to manage Effectively state funds, and the inability to find alternative financing solutions.   LINK

The Rise In The Exchange Rates Of The Dollar In Baghdad And Kurdistan

Shafaq News/ The exchange rates of the US dollar rose against the Iraqi dinar, on Monday, on the main stock exchange in the capital, Baghdad, and in the Kurdistan Region.

Shafak News Agency correspondent said that the Al-Kifah and Al-Harithiya Central Stock Exchange in Baghdad recorded this morning 148,600 Iraqi dinars, compared to 100 US dollars.

While the stock exchange prices on Sunday were 148,350 Iraqi dinars, compared to 100 US dollars.

Our correspondent indicated that the buying and selling prices increased in the banking shops in the local markets in Baghdad, where the selling price amounted to 149,000 Iraqi dinars per 100 US dollars, while the purchase prices amounted to 148000 Iraqi dinars per 100 US dollars.

In Erbil, the capital of the Kurdistan Region, the price of the dollar also increased, as the selling price amounted to 148,600 dinars per 100 US dollars, and the purchase price reached 148,400 dinars per 100 US dollars. LINK

Low Gold Prices In The Iraqi Markets

Shafaq News/ "Foreign and Iraqi" gold prices fell in the local markets, today, Monday.

Shafak News Agency correspondent said that gold prices in the wholesale markets on Al-Nahr Street in the capital Baghdad recorded this morning, the selling price of one weight of 21 karat of Gulf, Turkish and European gold amounted to 384 thousand dinars, and the purchase price of 380 thousand, while the selling prices for yesterday were 386. Thousand dinars.

Our correspondent indicated that the selling price of one 21 carat weight of Iraqi gold also decreased at 344 thousand dinars, and the purchase price reached 340 thousand.

With regard to gold prices in the jewelers’ shops, the price of selling a weight of Gulf 21-carat gold ranges between 385 thousand and 395 thousand dinars, while the selling price ranged from the weight of Iraqi gold between 345 thousand and 355 thousand dinars.  It is equal to one mithqal of gold (five grams).  LINK

The Dollar Is Rising In The Iraqi Market

Economie| 09:33 - 06/13/2022   Baghdad - Mawazine News, the dollar exchange rates rose, today, Monday, on the Iraqi Stock Exchange.  Selling price: 148,650 dinars per 100 dollars,  buying price: 148,550 dinars per 100 dollars.   https://www.mawazin.net/Details.aspx?jimare=196270

Oil Prices Are Falling Again

Economie  2022-06-13 | 02:21  825 views  Oil prices fell more than $2 on Monday, after a surge in coronavirus cases in the Chinese capital dashed hopes of a rapid increase in China's demand for fuel, while concerns about global inflation and economic growth further depressed the market.

Brent crude futures fell $2.06, or 1.7 percent, to $119.95 a barrel by 00:33 GMT, while US West Texas Intermediate crude recorded $118.54 a barrel, down $2.13, or 1.8 percent.

Prices fell after Chinese officials warned on Sunday of a "vicious" outbreak of corona in the capital, and announced plans to conduct mass testing in the capital.BeijingUntil Wednesday.

Fears of an interest rate hike after a sharp rise in US inflation data on Friday also put pressure on global financial markets.

Both world benchmarks rose more than one percent last week, after data showed the strength of demand for oil in the United States, the world's largest oil consumer, despite inflation fears and hope that consumption may rise in the China, the second largest oil consumer in the world, after lifting the closure measures from the first of June.   LINK