Analysis of the Impact of Disaggregates Government Expenditure on Economic Growth in Iraq

Iraq heavily depends on oil revenues, which expose it to global oil price fluctuations as well as structural crises. Therefore, in the 2004-2023 crisis period, Iraq experienced economic shocks that followed the change in global prices and internal disturbances that undermined the stability and an enabling environment for growth. The government spending in the last five years has increased; however, its contribution to economic growth has been limited due to poor targeting on productive investment-driven expenditure and high reliance on current spending in the budget.

This study adopts a quantitative methodology using time series data for the period 2004-2023 in Iraq. The Autoregressive Distributed Lag (ARDL) model was used, which is employed to analyse the short- and long-term correlation between economic variables.

Finally, the econometric tests findings indicate a long-term cointegration correlation between government spending components, oil prices, and the inflation rate, and economic growth. There was a direct correlation between investment spending, education spending, and oil barrel price and economic growth, and an inverse correlation between current spending, health spending, and the inflation rate and economic growth.

While the impact of the current spending factor is of low intensity, investment spending is an active factor in stimulating economic growth in Iraq. Therefore, it is important to reorient the fiscal regime to support investment fields with production tendency and introduction of reform policies that promote economic elasticity and weak dependence on oil money.