Infrastructure report

Q1 2018

www.bmiresearch.com


IRAQ

INFRASTRUCTURE REPORT

INCLUDES 10-YEAR FORECASTS TO 2026

Published by:BMI Research

Iraq Infrastructure Report Q1 2018

INCLUDES 10-YEAR FORECASTS TO 2026

Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research Copy deadline: October 2017 ISSN: 2044-5601

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CONTENTS

BMI Industry View 5

Forecast & Industry Developments 5

Table: Infrastructure - Construction Industry Forecasts (Iraq 2016-2026) 6

Risk/Reward Index 6

Table: Infrastructure Risk Reward Index (Iraq 2017) 6

SWOT 7

Infrastructure SWOT 7

Industry Forecast 9

Construction And Infrastructure Forecast Scenario 9

Latest Updates 9

Table: Construction And Infrastructure Industry Data (Iraq 2016-2026) 9

Structural Trends 10

Transport Infrastructure - Outlook And Overview 18

Latest Updates 18

Structural Trends 19

Table: Major Projects - Transport 28

Energy And Utilities Infrastructure - Outlook And Overview 30

Latest Updates 30

Structural Trends 31

Table: Top Five Major Projects - Energy and Utilities 38

Residential/Non-Residential Building - Outlook And Overview 40

Latest Updates 40

Structural Trends 40

Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure 48

Industry Risk Reward Index 51

Iraq - Infrastructure Risk/Reward Index 51

MENA Infrastructure Risk/Reward Index 53

Market Overview 60

Competitive Landscape 60

Table: Key Company Financial Data 60

Methodology 64

Infrastructure Forecast Methodology 64

Industry Forecast Methodology 64

Sector-Specific Methodology 65

Infrastructure Risk/Reward Index 69

BMI Industry View

BMI View: The scale of the country's reconstruction needs and the elevated levels of structural demand for additional infrastructure investment will drive broad-based growth across the infrastructure spectrum, though we caution that Iraq will remain one of the highest risk markets globally from an operational and security perspective, with tensions mounting between KRG and Baghdad.

Forecast & Industry Developments

• 
  The massive scale of required investment will ensure that Iraq remains a vibrant source of contract opportunities for international firms in the coming years; with potential for significant industry growth should the security situation improve.
  

• 
  While the defeat of Islamic State in the country is an obvious positive, growing tensions between the Kurdistan Regional Government and Baghdad after a Kurdish independence referendum have resulted in military action by Iraq Security Forces against Kurdish Peshmerga held Kirkuk. While we do not expect a significant increase to sustained armed conflict, we note that this is another major dent to the country's security and investment risk profile.
  

• 
  When the situation stabilises, the Iraqi Minister of Planning, Salman al-Jumaili, has estimated that the country will require upwards of USD100bn in investment to repair damage wrought by IS.
  

• 
  Our Oil & Gas team forecasts that the price of Brent will rise to USD72 per barrel by 2021, which, combined with continued inflows of donor money and a reducing deficit, should enable the Iraqi government to allocate additional funding to rebuild the country's shattered infrastructure base.
  

• 
  Infrastructure development in Iraq will occur against a brightening macroeconomic backdrop, with GDP expected to expand by an annualised average of 3.3% out to 2021, still well below potential.
  

• 
  We have left our construction industry growth forecast unchanged this quarter, with positive growth returning in 2017 at 1.3%, before achieving annual average growth of 7.1% over 2018-2021, with significant downside political, security and business environment risks. Though we note that, should the security situation markedly improve, there is also room for meaningful upward revisions to our medium- long-term forecasts.
  

Table: Infrastructure - Construction Industry Forecasts (Iraq 2016-2026)

Construction industry	2016e 13,251	2017f 13,735	2018f 15,459	2019f 17,386	2020f 19,335	2021f 21,470	2022f 23,637	2023f 25,897	2024f 28,276	2025f 30,880	2026f 33,733
value, IQDbn
Construction Industry Value, Real Growth, % y-o-y	-4.40	1.25	8.75	7.47	6.21	6.04	5.10	4.56	4.19	4.21	4.24
Construction Industry Value, % of GDP	6.6	6.3	6.6	6.7	6.7	6.8	6.9	6.9	7.0	7.0	7.1

e/f = estimate/forecast. Source: National sources, BMI

Risk/Reward Index

• 
  We have overhauled our Infrastructure Risk/Reward Index (RRI) methodology to more accurately capture the different elements that impact the overall investment attractiveness of a country's infrastructure sector. We have increased the number and variety of variables that make up the final index score and we have re-assessed the weightings of the Reward and Risk indicators to ensure the most accurate reflection of the Risk/Reward environment.
  

Table: Infrastructure Risk Reward Index (Iraq 2017)




Risk/Reward Index Rewards Industry Rewards Country Rewards Risks Industry Risks Country Risks

45.1 64.7 67.0 61.3 15.7 21.2 10.3

Scores out of 100, Higher score = more attractive market. Source: BMI