How did the Persian Gulf War affect Iraq’s economy and infrastructure?

The Persian Gulf War had a devastating impact on Iraq’s infrastructure and economy, reversing many of the developmental gains achieved in previous decades.1

Infrastructure Damage

Attacks by the U.S.-led coalition caused extensive destruction to Iraq’s communication and energy systems. The failure of electricity grids severely disrupted other essential services, and a critical shortage of spare parts prevented necessary repairs, leading to long-term deterioration of the country's physical infrastructure. While the government attempted to repair some of this damage—particularly in and around Baghdad—these efforts were often diverted toward constructing monuments and palaces for the regime.12

Economic Impact

The war, combined with the subsequent UN embargo, dealt a severe blow to the Iraqi financial system. Key economic consequences included:3
* GDP Collapse: In the year following the war, Iraq’s gross domestic product plummeted to less than one-fourth of its previous level.3
* Trade and Industry: The UN embargo halted oil exports, which were the primary source of foreign exchange.43
* Standard of Living: Retail sales declined as unemployment rose and the purchasing power of the dinar sharply decreased, forcing the middle class to spend most of their income on basic necessities like food and shelter.2