Economic crisis situation facing Iraq; an effect of Corona virus pandemic. (Preprint)

BACKGROUND If we study historical data on GDP growth from a large panel of countries, we observe that historically, sharp increases in search activity, in particular for the “recession topic’’, are associated with subsequently sharp contractions in growth rates – in particular, consumption growth. We find that a 100% increase in search intensity for the “recession topic’’ in a quarter vis-à-vis the country-specific average intensity is associated with a 1.5 percentage points lower growth in consumption or a 1 percentage point lower growth in real GDP in the subsequent quarter. What may lie behind these economic anxieties? And how can the economic fallout be limited? To shed some light on this, we conduct an online survey experiment in a nationally representative sample with around 1000 participants from the US on March 4th. Through an online survey experiment conducted in partnership with Luc.id in a representative sample of the US population, we shed light on the underlying mechanisms through which the new coronavirus may be driving economic anxieties. We elicit peoples’ beliefs about both the case mortality and its contagiousness (R0) and contrast this with what the medical literature has documented so far. The WHO recently estimated that the mortality of Covid19 disease triggered by the new coronavirus is around 3.4%. Earlier estimates were closer to 2%. The contagiousness R0 was estimated around 2. Empirically, the beliefs about mortality are quite heterogeneous. More than 50% of respondents think mortality is higher than 5% (average at 19%). This seems substantially higher than what the medical literature on the new coronavirus suggests to date. The beliefs about contagiousness are also heterogeneous, with 50% of respondents thinking that every infected person infects at least 10 others. The average is substantially higher with 43. OBJECTIVE Objectives of this study This Research is aimed at identifying the economic impact of Corona virus lockdown on the global economy and markets and Economic crisis situation facing Iraq; an effect of Corona virus pandemic . METHODS In this Research we would talk about In this report, we talk about the impact of the corona virus on the global economy and market. We explain how coronavirus has a big impact on different sectors of living such as airlines, tourism, factories and companies. Also, we talk about the impact of the corona virus on some countries which have huge economies like the United State and China. It stopped importing and exporting their product and their economy has stopped for more than 2 month. In other side, we mention that there are some companies that have benefit from this situation such as e-commerce business due to most of the government in most of countries did not let their people leave their houses they told them stay at home to save yourself. Whereas people stay at home, they use the internet to buy their basic needs and wants. Some other sectors have profit because of covid-19 such as social media application a good example is zoom application, it became more popular. It serves video group video call most of student and organization use it too much to meet each other. In literature review, we took some good report from other people point of view that they talk about the impact of this virus on economy. Finally, we mentioned how the medical sector and most countries are working together to find vaccine for this virus in order to protect all of the world. In my point of view, this virus is a good experience for each country to review their plan and make them strong. A good example for this is China. RESULTS How Corona virus has impacts on decreased import, exports and effects on decreasing oil prices: The use of gasoline and other fuels is dropping as Saudi Arabia and Russia increase production, sending oil prices to their lowest level in a generation. With the corona-virus pandemic all but eliminating travel and commutes, demand for energy is tumbling, and oil companies from Algeria to West Texas are slashing budgets. Refineries are cutting production of gasoline, diesel and jet fuel. Pipeline operators are telling producers that they can ship crude only if there is a buyer willing to take the fuel because storage tanks are filling up fast. Oil companies are dropping rigs, dismissing frocking crews and beginning to shut down wells. As much as 20 percent or 20 million barrels a day, of oil demand may be lost as the global economy slows, according to the International Energy Agency. . (Cliford claus march 31 2020 newyork times)That is roughly equivalent to eliminating all U.S. consumption. To make matters worse, Saudi Arabia and Russia are increasing oil production to regain market share from American oil companies that increased production and exports in recent years. Global oil benchmark prices hover around $20 a barrel — levels not seen in a generation — and regional prices in West Texas and North Dakota have fallen even further, to around $10 a barrel. That is about a quarter of the price that shale operators typically need to cover the costs of pulling oil out of the ground. If these prices persist, a big wave of bankruptcies is inevitable by the end of the year, experts say. Iraq only has oil and Netherland Flowers; if that is a decrease they will be bankrupt: Political and security crises in Iraq have been escalating, and the corona virus has recently been added to the list. Meanwhile, news about the dropping oil prices has added fuel to the fire, and Iraqis are all at risk. According to (Mazhar Mohammad Salah), ‘’economic affairs adviser to the Iraqi government, 93% of Iraq's budget relies on oil exports’’.On March 14, Salah said, “Iraq has lost half of its financial revenues, with oil prices dropping to $30 per barrel.” . (Cliford claus march 31 2020 newyork times) According to the 2020 budget draft that the government proposed and awaits voting on in the parliament, the budget is $135 billion, and the deficit amounts to $40 billion. What's worse is, the numbers were calculated based on a selling price of $56 per barrel of oil. But this price has been almost halved. Most of the Iraqi budget goes to the salaries of the 7 million employees as operating expenses. The drop in oil prices will directly affect them, and their only income will be government salaries. Salam Seism, former economic adviser to the Ministry of State for Civil Society Affairs, told Al-Monitor, “The dropping oil prices are directly affecting the situation of Iraqis because oil accounts for 93% of the Iraqi budget. Besides, Iraq has a renter and consumption budget rather than a developmental one. All revenues from oil and other resources feed salaries.” She added, “The dwindling revenues lead to dropping salaries and this is a new disaster for Iraqis, in addition to the deficit reaching $51 billion. All these are signs that the Iraqi budget does not follow a financial and economic logic. The salaries and privileges of high-ranking employees range between $7 and $8 billion. The government must cancel these privileges and reduce the salaries so that lower-ranking employees do not bear the brunt.” In an attempt to weather the impact of dropping oil prices, the Iraqi parliamentary Economic and Investment Committee proposed March 12 a series of steps, including halting investment spending and curbing operational spending; making agreements with creditors to delay the settlement of Iraq’s local and foreign debt until the financial situation improves; and collecting state debt from the cellphone and telecommunication companies.” The government also proposed “halting payment of money to investors in the electricity sector; working on boosting government revenues; supporting the Treasury Issam al-Jalabi, oil expert and minister of oil in 1987-1990, said in press statements March 9, “Iraq will lose billions of dollars because of its loss of huge oil revenues, which will impact the provision of services, medication and food, while the country needs all available funds to face the COVID-19 outbreak.” Outgoing Prime Minister Adel Abdul Mahdi called for measures that can alleviate the impact of dropping oil prices on Iraq. However, his government did not announce these measures or their mechanisms, as it has its hands full with the coronavirus crisis, which has not been allocated an emergency budget. Iraq has been facing an economic crisis since the first day oil prices dropped. Abdul Mahdi has been trying to reassure Iraqis regarding the dropping oil prices, saying, “This is just a bump in the road, and it does not mean our economy is collapsing or that the state is going bankrupt.” But his reassurances do not match the warnings of economic experts. News about dropping oil prices shocked many Iraqis — mostly state employees whose salaries depend on oil revenues — who voiced their concerns on traditional and social media. State employees and experts in Iraq expect the 2020 financial budget to suffer hugely, and they expressed their concerns about the government’s inability in the coming months. This in itself constitutes a new challenge for the Iraqi government, in addition to the political, security and social crises, especially those related to the US-Iranian conflict, the coronavirus outbreak and the ongoing protests in southern Iraq. The financial revenues that entered Iraq in February amounted to $5 billion, when the selling price of oil was $51 per barrel. But this figure will not enter the Iraqi state budget for March, because

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