Early elections may not ease the country’s political crisis
Iraq continues to face elevated inflation, with the latest CPI increasing 5.4% YOY in July. We forecast that inflation will average 5.3% in 2022. High prices, coupled with political instability that is complicating public spending plans, will dampen already-weakening consumer sentiment and prolong the risk of logistical disruptions.
As Iraq approaches a year of political stalemate, the country may be heading toward snap elections. A week after deadly clashes erupted in Baghdad’s Green Zone, the president, prime minister, and parliament speaker, in a meeting boycotted by Al Sadr, met with representatives from political parties and agreed to work toward holding early elections. Sadr’s former allies, the Kurdistan Democratic Party (KDP) and the Sunni Sovereignty Alliance, emphasized their support for early elections. The dissolution of parliament, which has been a key demand of Al Sadr and his bloc, has been rejected by Iraq’s Supreme Federal Court. The Coordination Framework continues to support Mohammed Shia’ Al Sudani as a candidate for prime minister, with parliament set to convene next week after a month of suspended sessions.
The possibility of snap elections is becoming an increasingly likely scenario. Despite this, deep political fragmentation means another round of elections will be challenging amid complex coalition formations and possible retaliation by Al Sadr and his supporters. This, coupled with growing disillusionment of Iraqis, may be reflected in lower voter turnout. Amid this political turmoil, oil revenues will continue to trickle through but at a lower rate, mainly due to lower oil prices and disruptions from the Basrah Oil Terminal.
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