Heightened insecurity risks will disrupt the market and private and public spending, which will require more flexible demand planning to account for short-term market volatility amid rising political violence. In addition, with demand inconsistencies and higher operational costs, MNCs may need work with distributors to help them manage financial pressures amid margin tightness. Separately, with expected delays to the 2022 budget, B2G companies should plan for possible delays in spending execution and reduced government demand.
On February 6, the Supreme Court temporarily suspended one of the two top candidates for the presidency, Hoshyar Zebari, amid allegations of corruption, leading to the indefinite postponement of the vote until parties in Muqtada al-Sadr’s coalition, the largest coalition in parliament with 141 seats, agree on a new candidate.
Meanwhile, militia rocket and drone attacks have been increasing since the beginning of 2022, including recent ones on Baghdad International Airport, the parliament speaker’s home in Anbar, and a US base in Baghdad. On January 21st, the Islamic State (ISIS) killed 11 Iraqi soldiers in Diyala, making it the deadliest assault on the Iraqi security forces since the October 2021 election.
Government formation is unlikely before April 2022, delaying with it the 2022 budget. Without a 2022 budget, the caretaker government will be restricted in procurement and CAPEX spending; only public salaries and some ongoing projects will be maintained. The risk of political violence and slow policymaking will remain high through H1 2022 even once a candidate wins. Al-Sadr will offer some concession seats to the opposition and militia groups in a bid to reduce violence—but not enough to prevent all Iranian-backed militias from marginalization—keeping the risk of violence substantial. Additionally, ISIS activity will deter non-oil sector investments in H1 2022 at least and prolong the recovery of Iraq’s economy.
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