Flames emerge from a pipeline at the oil fields in Basra, southeast of Baghdad, Iraq, October 14, 2016. Essam Al-Sudani | Reuters

One of the most unstable countries in the world also happens to have the distinction of being one of the fastest growing economies in the world. Believe it or not, Iraq — riven as it is by terrorist insurgency and civil strife — is expected to grow by a sizzling 7.2 percent this year, according to World Bank data. It recovered from a brutal 9 percent contraction in 2015 and is outpacing the Middle East's average economic growth of 3 percent. And while it may seem unthinkable for now, investors say Iraq could eventually be positioned to become a magnet for investor capital — and it may arrive sooner than many people think.

For now, the country remains in the throes of a major offensive to root out ISIS extremists that have laid siege to entire swaths of Iraq. However, analysts point to structural factors bolstering the battered OPEC nation's recovery — including a recovery in the bear market for oil.

Given that its peers in the Gulf (Saudi Arabia, for example) relied too heavily on triple-digit oil prices to support their domestic budgets, Iraq appears poised to navigate cheaper oil prices better than others in the region, even as it recently obtained a $5.4 billion International Monetary Fund loan to boost stability.

"Oil at $30 was devastating for a growing country like Iraq, especially coming down from above $100," Shwan Taha, founder of Rabee Securities, a brokerage headquartered in Baghdad told CNBC recently.

At current levels under $50, however, "it is a good price to give a breather and also not to cause the population to be dependent on it," Taha added. "The economy has to work to grow."





Although Iraq has the natural resources to meet some of the criteria for emerging market status, on others it is still quite far away. We think it could take a decade or more before this would become a real discussion. Alan Cameron economist, Exotix Partners

Baghdad Phototreat | iStock/360 | Getty Images

The IMF package can be seen as a badge of credibility that somewhat elevates Iraq from pariah status in the eyes of investors, some say, and comes at a time when the country's fundamentals are showing resilience. "Fiscal consolidation, including a freeze in nominal spending, has been delivered and oil exports from the South have surprised on the upside," said Stuart Culverhouse, head of research at Exotix Partners, a London-based investment firm that specializes in emerging markets.

Exotix has been advising clients to buy Iraq's bonds, which have been rallying for much of the year to levels not seen in more than a year, when oil was priced above $65 per barrel. A number of blue chip wealth managers, hedge funds and smaller investors have been buyers.

In addition, Iraq's debt is likely to fall below 79 percent of gross domestic product this year, according to Exotix, while payment delays to international oil companies have been shortened from 220 days to 120 — and may fall further.





Still a ways off