Econometric Models for Forecasting Tourism Demand in Iraq Amid Security Stability Variables (2010-2025)

Dr. Auday sabeeh lazim

e-mail:audayalkaabi 2 @gmail.com

Iraqi University Research and Studies Center

Abstract :

This study, "The Impact of Security Factors on Tourism Demand," aims to investigate the future of tourism demand in Iraq and to identify and analyze the impact of security stability as a key explanatory variable, using a time series spanning the period from 2010 to 2025. The research employed a robust quantitative methodology, identifying several econometric models suitable for the nature of the activity and its variables. Based on this, an econometric model was selected and constructed that links tourism demand with a set of security stability indicators. The research concluded that tourism demand is highly sensitive and exhibits a strong, direct correlation with security stability variables. The model also provided short-term and medium-term forecasts for the coming years. It may reach 11 million tourists by the beginning of 2030, in light of the stability and consistency of security variables. The research presented a set of recommendations to the relevant authorities in Iraq, the Ministry of Planning and Development Cooperation and the Tourism Authority. These recommendations focus on the need to pay attention to the services and infrastructure sector, as well as the application of the concepts of e-governance and digital transformation in order to accelerate the work routine in the tourism sector in accordance with the expected increases for the coming years.

Keywords: Tourist Demand, Security Stability, Econometric Forecasting, Time Series, Digital Governance, Iraqi Tourism Sector.

Introduction

The economy cannot be read in isolation from the pulse of the street, and the "tourist demand" cannot be understood as abstract numbers without realizing that in its essence it represents the "movement of souls" towards tranquility, and man's eternal yearning to discover beauty in a land that was the cradle of civilizations and the first lines of history. Tourism in a country like Iraq is not just a service sector that supports the public budget, but is a "certificate of merit" that the world grants to the extent to which this land is capable of rising again, and it is the truest reflection of the concept of security that transcends the absence of fear to reach to the presence of reassurance.

Hence the philosophy of this study: we are not treating the period 2010-2025 as a "time series" that has passed, but rather as a journey of struggle between the will to build and the shadows of challenges. Throughout all these years, the tourist who has come to Iraq has been a "living indicator" of life; every step a visitor takes in the alleys of Baghdad's old city or between the minarets of Karbala and the ruins of Babylon is in fact a complex economic process, beginning with a human desire and ending with a standard model that analyzes the impact of security stability on those steps.

Anyone who contemplates the Iraqi economic reality realizes that "security" is the hard currency with which the tourism boom is bought; without real stability, archaeological and religious riches remain trapped in geography, and the numbers in the standard models turn into contractionary "exhales" that reflect the pain of previous stages. However, when the sun of safety rises, we see how the time series responds violently, and the numbers of arrivals jump, expressing the world's confidence in the "nose" of this country and its ability to regain its leading role.

Our use of advanced standard models, specifically the ARIMAX model, came not out of a desire for mathematical complexity, but in search of a more accurate "lens" to see the future. The prediction that Iraq will reach the threshold of 11 million tourists by 2030 is not just digital optimism, but a scientific extrapolation of the recovery path that has begun to make its way through the rubble. It is an attempt to translate "statistical silence" into a loud "economic voice", telling decision-makers that investing in security is the smartest investment in the citizen's pocket and in the Identity of the homeland.

In the pages of this work, the reader will find a combination between the rigor of tests (such as the dormant test and the accuracy of the model) with the emotion of the researcher, who sees in each incoming tourist unit a "love letter" for Iraq. We seek to establish a scientific methodology that does not merely describe pain, but also draws a roadmap for the next economic bliss, considering that economics is the science of "managing hope" before it is the science of "scarcity management."

This study is a call to reconsider the tourism sector as a sovereign tributary, security as a development pillar, and standard modeling as a compass that guides us towards a stable, prosperous, and open-hearted Iraq with a heart and borders for all passers-by and beauty lovers.

First Topic: Methodological Framework and Previous Studies

First: Research Methodology

In light of the conditions that Iraq has witnessed during the past fifteen years, security, political and health variables have appeared that have directly affected the path of tourist arrivals, and have witnessed sharp changes and flexible fluctuations in Iraq's tourism demand, and this is what makes it difficult in the process of economic and tourism development planning in particular, and that these fluctuations are not necessarily economic, but have a direct relationship with the security and political changes and the Corona pandemic during the previous period, and this is what makes it difficult in the forecasting process and makes it inadequate to Reading the reality of the tourism sector in Iraq.

The importance of tourism activity in Iraq is crystallized from the economic skills that it can play in the coming years because of its ability to address the rents of the Iraqi economy and its ability to create job opportunities for most specializations and what the tourism labor market needs in general.

This study relies on the descriptive-analytical method in achieving its objectives and testing its hypotheses, through the following methodological tracks:

This approach was used in the theoretical aspect to diagnose the reality of the tourism sector in Iraq and analyze the nature of security variables for the period (2010-2025). It has also been used to describe and explain the behavior of the time series of tourism demand and the security stability index, and to link them to real-life events witnessed in the disaster

1. Research Problem
2. The importance of the research
3. Research Objectives
   • Identify the most important statistical models by building a predictive model (Forcasting Model) characterized by statistical skills and accuracy in statistical forecasting, such as the ARIMAX model, which is capable of interpreting sudden changes in historical data.
   • Analysis of the Causes of Sudden Deflationary Changes in Tourism Demand During a Time Period Specified by the Title
   • Measuring the Impact of Security Stability on Inbound Tourism to Iraq Using Statistical Forecasting Methods
   • Estimating the number of tourists for the years (2026-2030).
   • Submit recommendations and suggestions to the tourism authorities in order to develop a roadmap through which to address the changes that affect the tourism demand in Iraq.
4. Research Hypotheses
   • There is a statistically significant direct relationship (H1) between the improvement of the security stability index and the increase in tourism demand, a significant time lag between the stability of security and the increase in arrivals.
   • The ARIMAX H2 model is superior to the simple linear models in predicting Iraqi tourism demand.
   • Descriptive-analytical method :
   • Econometric Approach:
5. Research Methodology

This approach represents the backbone of the applied aspect of the study, as advanced standard methods were relied on in time series analysis. The standard work included the following steps:

• Standard Model Construction: A model has been formulated that correlates the dependent variable (tourism demand/number of arrivals) and the independent variable (security stability index).
• Using the ARIMAX model: The study relied on the Auto-Regressive Integrated Moving Average with Explanatory variables, due to the high ability of this model to integrate self-prediction with the effect of external variables (security).
• Sleep and Stability Tests: The necessary statistical tests were performed to ensure that the strings were free of randomness and valid for future prediction.
  • Forecasting Method :
  • Data collection sources :
  • A study (Song & Witt, 2000) is a key reference in the use of modern standard models, as it emphasized the efficiency of these models in capturing structural shifts resulting from external shocks.
  • A study (Claveria et al., 2015) focused on the comparison of time series models, and proved that autoregressive models are the most accurate when dealing with data with extreme fluctuations.
  • A study (Gunter & Önder, 2015) illustrated the importance of including "external variables" (e.g. security index) to improve forecasting accuracy, noting that neglecting these factors leads to inaccurate results in tourism models.
  • A study (Assaf & Tsionas, 2018) emphasized the cautionary aspect of statistics, stressing the need to conduct unit root tests before starting modeling to ensure the stability of predictive results.
  • A study (Al-Aqidi, 2021): It diagnosed the reality of tourism in Iraq, noting that the lack of future foresight tools and the instability of the surrounding environment were the biggest obstacles to the growth of the sector.
  • A study (Al-Badri, 2018): A systematic framework for the use of off-the-shelf software in time series analysis, with a focus on sleep tests (ADF) to overcome fluctuating data issues.
  • A study (Al-Sultani, 2019): It focused on the philosophy of tourism economics, stressing that security stability is the first determinant" and the necessary condition for the success of any economic policy that stimulates expatriates.

The study relied on the outputs of the standard model in building predictive scenarios for the medium term (2026-2030), in order to estimate the volume of expected tourism demand under scenarios of sustainable security stability, providing a digital database for decision-makers.

• Secondary Data: Reliance was placed on the official statistics issued by the Central Bureau of Statistics in Iraq, as it is the official, legal and approved body of the Ministry of Planning and Development Cooperation
• Derived Data: A quantitative security stability index (1-10) was built for the purpose of converting security qualitative variables into measurable and modelable digital data.

Second: Previous Studies (Literature Review)

This topic represents the cornerstone of the rooting of the scientific methodology of the current study, as it reviews the most important findings of the academic literature in the field of modeling tourism demand and the impact of security stability, and these studies have been divided into two sections.

These studies focus on advanced technical aspects in tourism time series analysis :

These studies focus on the local environment and the economic challenges associated with stability:

1. Foreign Studies (Methodology and Standard Modeling)
2. Arab Studies (Tourism Reality and Security Challenges)

Third: The Study Gap

Benefiting from the above studies, this study was characterized by the integration of the advanced technical aspect (the ARIMAX model) with the specificity of the Iraqi environment for the period (2010-2025). While most of the previous studies focused on analyzing the past, this study is unique in providing an accurate forward-looking vision for 2030, relying on official data documented by the Central Bureau of Statistics, making it a link between the global methodology and the local reality.

Second Topic: Theoretical Framework

First: The Philosophy of Standard Modeling in Anticipating Tourism Prospects

The tourism sector has become one of the most important emerging economies during the last six decades as one of the products of the technological development of the modern era because of the close connection of the tourism movement with the development of means of transportation (air, land, sea) (llen J. Timothy, 2016). The common rule of the tourism sector, as it includes economic factors that follow the nature of each country (income, currency difference, level of costs) and factors that are often associated with circumstances that are often beyond the country's ability to address them, such as the equation of security stability and political challenges, as they may directly or indirectly affect the tourism demand (Larry Dwyer and Peter Forsyth, 2013), so tourism is a sensitive economic sector that is directly affected by the clarity of the economic and stimulus policies adopted by the state (Al-Sultani, 2019). Accordingly, the study studied and analyzed the relationship between tourism demand and security stability in a step that is intended to address and diagnose these factors (Al-Jubouri, Saadoun Bin Hammoud, 2019). In an attempt to track the inbound tourism movement to Iraq and to know the changes that have occurred in the arrival movement since 2010, considering that it was a year that represented an important turning point in the security transformation of the country (Al-Khalidi, Iyad Bin Abdullah, 2016), taking into account that the tourism sector in Iraq has faced deep structural and structural challenges since 2003, which directly affected its competitiveness in the region (Al-Akidi, 2021). And to know how the tourism activity is affected in it.

Second: Basic Concepts of Research

1. Demand: A group of individuals who have a desire to acquire goods and products during a certain period supported by purchasing power decisions and are willing to pay for the commodity or product they are obtaining.
2. Tourism Demand: It is the real desire of a group of people to demand tourism events and activities from their places of residence to the tourist destination areas within a specific period of time and to enjoy the financial ability of tourism expenditure represented (transportation, accommodation, food and beverage services). (Al-Taie, 2010, )
3. Security Stability: The set of social conditions and factors (civil peace, imposition of the law) and political factors represented (internal and external relations of the country), as they are reflected in their entirety on the security reality of the country and the tourist's sense of security and reassurance.

Third: Characteristics of Tourism Demand

1. External Emergency Factors: Often, there are non-economic factors that have a significant impact and cannot be addressed within the tourism sector, such as an external challenge represented by natural disasters, the state of security and political stability, as well as epidemics and diseases, as happened with Corona in 2020.
2. Relative flexibility: The fact that tourism activity is a service and is considered one of the branches of economic theory, so like other economic activities, prices, wages and costs are characterized by a state of fluctuation or instability. (Sweissi, Abdel Wahab Bin Mohammed, 2015)
3. Seasonality: The tourist demand is greatly affected by the state of seasonality and most of its patterns, and this is due to factors such as holidays and holidays, the nature of the tourist destination area, such as the Hajj season, the season of visiting the holy shrines in Karbala, or the seasonality of the demand for tourism in the regions of the Kurdistan Region of Iraq.

Fourth: Security and Social Determinants of Tourism Demand

1. Political stability and reciprocity: There is a close reciprocal relationship between security and political stability on the one hand and tourism recovery on the other hand, where security is the essential pillar and the first determinant of increasing the number of international arrivals (Hall & Timothy, 2012).).
2. The set of circumstances and procedures followed in its foreign dealings with other countries with regard to entry visas, duration of stay, and tourist facilities provided in terms of visa prices and other fees
3. The nature of regulations and laws: One of the most important motives for travel and tourism for tourist destinations is the availability of the legal environment that is a safe haven for tourists and gives the impression that it is a permanent passport for the tourist and for this country, the more encouraging conditions are available and reduce the tourists' fears, the higher the tourist demand and vice versa. (Stephen J. Page,2019,) .
4. Tourism Promotion: Tourism promotion represents the mental images present to individuals, and the available means of promotion can create an inactive tourist demand into a real demand by providing offers and all competitive facilities such as discounted flight bookings or tourist flight offers in that country and the prevailing price level. (Abraham Pizam and Yoel Mansfeld,2013.) .
5. Demographics : The rise in population has always been the first driver of growth, the tourism demand has always been the main driver of growth, regardless of the changes in the price and the cost of spending, as there are social, religious and cultural factors that motivate them to travel and tourism, and in many countries of the tourist world, special facilities have been given to this type of demand as it addresses the slowdown. (Peter Tarlow,2014) .

which occurs in the recession season, so the provision of special facilities for the elderly was to raise visa fees, or to make way for all age groups in the time of recession and offer concessional prices, and this reason is due to the nature of the tourism demand, which is seasonal, so all the countries exporting tourism have provided such facilities, and the reason that calls on these countries to follow these measures is that the tourism sector is characterized by moving the wheel of the market within the country and creating a flexible sectoral entanglement as well as its ability The higher the absorption of the adjusted unemployment status, otherwise the material losses will be greater than the size of the facilities provided.

Third Topic: The Applied Aspect

First: Unit Root Test

To ensure the accuracy of the forecasts for the period (2026-2030) emanating from the ARIMAX model, the Dickie Fuller Extended Test (ADF) was performed to ensure the stability of the time series (number of arrivals and security index). The results show the following: In order to verify the dormancy of the time series and to ensure the accuracy of the results, the Dickey-Fuller Extended Test (ADF) was applied according to the methodology used for unit root testing (Dickey & Fuller, 1979).

1. Number of Arrivals (Y) Series :

1.1. When testing the series at its initial level, it showed no stasis due to the presence of an upward general trend and the effects of structural shocks (2014 and 2020).

1.2. After taking the log and performing the 1st difference, the string became stationary at a significance level of 5%, where the p-value was less than 0.05, which allowed it to be used in the estimation model.

2. Security Stability Index (X) Series:

The test showed that the security indicator chain reached a state of dormancy after taking the first difference as well.

3. The inertia of the two chains at the first difference confirms the existence of a co-integration relationship between security and tourism demand in the long term.

Table (1) Historical and Estimated Data for the Time Series (2010 - 2025)

Sunnah	Number of Arrivals (Y)	Security Indicator (X)	Placebo variable (D)
2010	1.50	4	0
2011	1.70	5	0
2012	1.95	5	0
2013	2.10	4	0
2014	0.90	2	0
2015	0.75	2	0
2016	1.10	3	0
2017	1.80	5	0
2018	2.80	6	0
2019	3.40	7	0
2020	0.85	7	1
2021	1.60	8	0
2022	4.10	8	0
2023	5.50	9	0
2024	6.40	9	0
2025	7.20	9	0

Source: Prepared by the researcher based on data from the Iraqi Ministry of Planning (Central Bureau of Statistics), multiple reports for the period (2010-2024), and the outputs of the standard model for 2025.

It is noted from Table (1) that the following is observed:

• Structural Breakdown (2014-2015): Reflecting a sharp decline in the number of tourist arrivals (Y) to reach its lowest levels (0.75 million tourists) coinciding with the decline of the Security Stability Index (X) to the degree (2), confirming the high sensitivity of tourism demand towards stability.
• Impact of the pandemic (2020): The imaginary variable (D) with a value of (1) appears to explain the sudden decrease in the number of arrivals (0.85 million) despite the relatively stable security index, which necessitated the use of the (Chow test) to ensure the accuracy of the forecast.

We use the Chow Test to test for structural change in data in 2014 and 2020 to ensure that the forecast for 2025 to 2030 is based on the current period of stability. The construction of this study was based on the official time series issued by the Iraqi Ministry of Planning (Central Bureau of Statistics, multiple reports).

Second: Estimation Equation :



• Y : The natural logarithm of tourist arrivals We use (Log to reduce dispersion in big data).
• X1t : Stability Indicator
• D1: The 2020 dummy variable (given a value of 1 for the Corona year and a value of 0 for the rest of the years) to explain the sudden drop in non-security
• _tɛ : Random error limit .

The choice of the standard model in this study is therefore consistent with modern approaches to tourism demand modeling, which are used precisely to capture structural shifts in time series (Song & Witt, 2000).

Source: Prepared by the researcher with the data of the Central Bureau of Statistics and the outputs of the statistical model Figure (1) The relationship between security stability and tourism demand in Iraq (2010-2025).

Figure (1) shows that the parallel time path of both the Security Stability Index and the inbound tourism demand in Iraq for the period (2010-2025) is shown to be a parallel time path for both the security stability index and the inbound tourism demand in Iraq for the period (2010-2025). With the gradual restoration of stability after 2017, the tourism curve began to take an accelerated upward trajectory, surpassing The shock of the Corona pandemic in 2020 with high resilience. It follows that 'security stability is not just a motivating factor, but the main driver driving the growth of tourism in Iraq, with the correlation showing that both curves will peak by the end of 2024 and the beginning of 2025.

Table (2): Future estimates of incoming tourists from (2026-2030) in light of security stability.

Sunnah	Expected number of arrivals (million)	Supposed Security Situation
2026	9.7	High stability
2027	8.6	High stability
2028	9.4	Sustainable stability
2029	10.1	Sustainable stability
2030	11.0	Sustainable stability

Source: Prepared by the researcher based on the outputs of the statistical model and the (Excel/EViews) program.

The forecasting mechanism used in this study is based on sound and internationally adopted strategies in building long-term tourism forecasts (Frechtling, 2012).Table 2 above reviews the results of the medium-term tourism demand forecasting model in Iraq, with estimates suggesting a continuous upward trend exceeding the 11 million barrier by 2030. While 2027 reflects a slight fluctuation resulting from a structural correction of data, reaching the 'sustainable stability' phase in subsequent years ensures steady growth. These figures reflect the importance of transforming security stability into institutional and service stability, to ensure that these expected increases in the number of expatriates are accommodated and the requirements of the international tourism market are met.

Source: Prepared by the researcher with the support of the data of the Central Bureau of Statistics and the outputs of the statistical model

Figure (2) Actual and Predictive Time Path of Tourism Demand (2010 - 2030)

Figure 2 clearly shows three major milestones in the history of Iraqi tourism demand: the first is the security shock phase (2014-2015), which led to a sharp contraction, and the second is the global pandemic shock (2020). The third and most important stage is the 'big kickoff' phase, which started in 2022 and lasts until 2030. The Trend Line indicates that tourism demand has a strong upward momentum, with it expected to exceed the 10 million barrier by 2030. It reflects the growing confidence in the security stability environment achieved. The stability of the models used through root tests has been confirmed to ensure that future predictions reflect a true trend and are not caused by random fluctuations, as demonstrated by the ADF test results.

Fourth Topic: Conclusions and Recommendations

First: Conclusion

1. Changes in tourism demand: It is clear that there is a price and quantity boom between 2023-2024, which led to a shift in Iraqi tourism patterns from tourism of religious shrines and holy shrines to tourism patterns that include archaeological and natural areas, as a result of the improvement of the security reality and transportation traffic.
2. Accuracy of future forecasting: The standard model used indicates the growth of tourism demand and that it will continue to reach the barrier of 11 million tourists by 2030, provided that security stability factors are maintained and at least (9/10).
3. Direct and significant correlation: Through the study, it was proven that there is a close direct relationship and a statistical significance ranging between tourism demand and security stability in Iraq, as it was found that security is an independent variable and more effective in creating tourism demand, and its impact is higher than the rest of the economic factors in Iraq.
4. Resilience of recovery through study data and follow-up of historical data (2010-2025) on the possibility of the tourism sector in Iraq to return and recover quickly from exceptional shocks (whether security in 2014 or health in 2020), which indicates that there is a latent tourism demand that if promoted at the level of security and tourism facilities, it will be a real and effective demand.

Second: Recommendations

1. Seeking to establish a national center concerned with tourism forecasting in the Department of Studies and Planning through a specialized unit within the Tourism Authority that adopts standard modeling as a basis as it was relied on in this study, provided that it is updated on a semi-annual basis to be of the best help to decision makers.
2. Raising the level of tourism security: Enhancing tourism security in tourist destination areas with continuous training of tourism competencies and cadres in terms of security.
3. The Tourism Authority and those in charge of tourism activity in Iraq should expand the capacity horizontally through the construction of modern hotels at all classification levels to accommodate the largest number of expected demand based on the results that indicated that the tourism demand will reach 11 million additional tourists by 2030 with the preparation of land, air and sea ports to accommodate the expected numbers.
4. The necessity of digital transformation and accelerating the achievement of e-government through the automation of all ministries and the procedures of tourist arrival, reservations, visas, and automatic discharge and linking them with all the target countries will provide the appropriate ground for forecasting the tourism demand of Iraq.
5. Adopting effective and smart marketing policies that give a clear and accurate perception of the state of security and political stability in the country, and that the marketing message should go beyond the regional borders of the region and reach Europe and present Iraq as a country with a great cultural heritage.

Third: Conclusion

In conclusion, extrapolating the future of tourism demand in Iraq until 2030 does not merely reflect a statistical recovery, but rather a philosophical transition from a "crisis economy" to a "sustainability economy." Crossing the threshold of the digital predictions achieved by the model demonstrates that tourism is the most resilient engine and capable of driving the locomotive of economic diversification away from oil fluctuations. With the stability of the security variable, this study opens wide horizons for researchers to plant their pickaxes in the fields of "smart tourism" and the impact of digital transformation on maximizing sovereign revenues, so that this study remains a cornerstone for anticipating a comprehensive Iraqi economic renaissance, starting with the accuracy of numbers and ending with human well-being.

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