Economic development in Iraq in 2008 has been "encouraging" according to a review of the country's economy by the International Monetary Fund (IMF).
Improved security and a more stable political environment mean economic activity has "picked up" on the back of increased oil production and exports.
IMF deputy managing director Takatoshi Kato said the authorities had kept the economic programme "on track".
But the IMF warned that the sharp drop in the price of oil may stall progress.
Oil is now more than $100 a barrel cheaper than it was in July this year.
Continued efforts to stimulate economic growth depend "on continued improvements in the security situation and prioritisation in the use of lower oil revenues", Mr Kato said.
Oil revenue in 2009 would be much lower than in 2008, he added.
To compensate, the Iraqi government has already prepared measures to reduce spending next year.
Mr Kato also called on the government to "step up the pace of structural reforms," and to complete a regulatory framework for commercial banks.
"Further efforts are required to strengthen governance and fight corruption, in particular in the hydrocarbon sector," he added.
On Wednesday, Prime Minister Gordon Brown announced that improvements in security meant that UK troops would be withdrawn from Iraq by July 2009.