This report does not constitute a rating action. Overview Key strengths Key risks The banking sector's limited reliance on foreign funding. Fragile economic conditions amid persistent regional geopolitical tensions. Dominance of state-owned banks distorts market conditions. Financial supervision and regulation lag international standards. The Iraqi economy has been significantly affected by export disruptions. As of August 2026, oil production has halved since the start of the Middle East war, driven by the closure of the Strait of Hormuz. We expect an economic contraction, with GDP dropping by 16% in 2026. While we expect disruptions to continue through 2027, we project the economy will rebound by 20%. Banking operations remain weak, with potential for recovery in 2027. Iraqi banks'lending book
