A bloody June in Iraq

Iraqis left physically unharmed by violence may still have an economic price to pay.

Iraq witnessed its bloodiest month in June since the height of its civil war in the summer of 2007. Preliminary data show that almost 2,000 civilians have died as violence gripped the country. The figure would rise significantly if casualties from the Iraqi security forces were also included. Not only does increased violence threaten the physical safety of Iraqis, it also adversely impacts the economic well-being of those fortunate enough to survive unharmed.

Data on casualties from violence in Iraq come from two main sources. The United Nations Assistance Mission for Iraq (UNAMI) publishes statistics on civilian and security forces casualties based on witness reports as well as evidence from civil leaders, government officials, international organisation, media reports and the UNAMI own network in Iraq. The figures released by UNAMI show that 1,531 civilians and 886 members of the Iraqi Security Forces were killed in June. These numbers exclude deaths in the Anbar province, where the UNAMI estimates further 244 civilian deaths. The figures make June comfortably the bloodiest month since UNAMI started publishing its statistics in January 2008.

The second source is Iraq Body Count, a project to record civilian casualties in Iraq since 2003 based mainly on verifiable media reports. Its preliminary estimate for civilian casualties in June stands at 1,934—the highest number since August 2007, or the heydays of the civil war. The data also show that 2014 is on track to become the most violent year outside 2005-7.

Unsurprisingly, increased level of violence tends to take its toll on economic activity. In recent years, higher levels of violence in Iraq were associated with lower economic growth. As the chart below displays, 2007 was the second most violent year and also the year which witnessed the slowest growth rate. In contrast, the relatively peaceful years of 2009-12 saw some of the highest levels of growth. Only 2006 stands out as an outlier with both high levels of violence and a fast-growing economy.

What does that imply about growth in 2014? If the levels of violence seen in the first half of 2014 were to continue into the second half of the year, 2014 would be the most violent year outside the 2005-7 period. Should the impact of violence on the economy be similar to the one witnessed in recent years, then we should expect real GDP growth of 4.4%.

Alternatively, a more tragic scenario in which the elevated levels of violence in June continued for the rest of the year would result in 18.5 thousand civilian deaths, making 2014 the third most violent year after 2006-7, the peak of the civil war. Under this scenario, real GDP would grow by a mere 3.1%. Given that population is also expected to grow by 3.1%, this would imply stagnant economic conditions for the average Iraqi.

So what are the economic costs of increased violence? The International Monetary Fund had recently forecast real GDP growth of 5.9% in 2014, the recent rise in violence would probably shave off 1.5-2.8% from this year’s real GDP—a significant cost for a country still lagging behind in terms of goods and services provided.

It means that Iraqis who were fortunate enough not to lose their lives or get injured during the recent violence may still have an economic price to pay.