Measuring the Impact of Banking Performance Indicators on Economic Growth in Iraq (2005-2025)

Abstract

This research aims to measure the impact of banking performance indicators on economic growth in Iraq during the period 2005–2025. This is achieved by measuring the effect of a set of banking performance indicators—namely, the ratio of bank deposits to money supply (DM), the ratio of cash credit to total deposits (CR), return on assets (ROA), and the non-performing loan ratio (NPL)—in Iraq during this period. These indicators are considered independent variables, while economic growth, measured by the real GDP growth rate, is considered the dependent variable. The research is significant due to the pivotal role the banking sector plays in mobilizing savings, directing financial resources toward investment, and boosting economic activity, particularly in the Iraqi economy, which is heavily reliant on oil revenues. The research adopted a descriptive and analytical approach, along with an econometric approach using time series models, such as the Autoregressive Distributed Lag (ARDL) model and cointegration tests, to analyze the short-term and long-term relationships between the study variables. Data from the Central Bank of Iraq, the Central Statistical Organization, the Ministry of Planning, and international sources were used when necessary. The expected results indicate a positive and significant impact of some banking performance indicators, particularly bank credit and deposits, on promoting economic growth. However, the impact of other indicators remains limited due to weak financial inclusion, the dominance of the oil sector, and limited financing directed towards productive sectors.