BEIRUT (AFP) - The Islamic State in Iraq and Syria (ISIS) group has lost more than 60 per cent of its territory and 80 per cent of its revenue, an analysis firm said Thursday, as the militant "caliphate" turns three.
The group declared its self-styled "caliphate" across swathes of Iraq and Syria on June 29, 2014, prompting the formation of a US-led coalition in a bid to halt its advance.
In January 2015, ISIS militants controlled about 90,800 sq km, but by June 2017, that number dropped to 36,200, said IHS Markit.
The biggest fall was in the first six months of 2017, when ISIS lost around 24,000 sq km of territory.
"The Islamic State's rise and fall has been characterised by rapid inflation, followed by steady decline," said Columb Strack, senior Middle East analyst at IHS Markit.
"Three years after the 'caliphate' was declared, it is evident that the group's governance project has failed," Strack said.
ISIS is facing swelling pressure from coalition-backed assaults on its twin capitals: Raqa in Syria and Mosul in neighbouring Iraq.
On Thursday, Iraqi forces said they had retaken control of the iconic mosque in Mosul where ISIS chief Abu Bakr al-Baghdadi made his only public appearance.
With forces also bearing down on Raqa in Syria, the remaining parts of ISIS's so-called "caliphate" are unlikely to survive the end of the year, IHS said.
The sharp decline in territory has also damaged ISIS' ability to collect revenue from oil production and smuggling, taxation, confiscation, and other similar activities.
IHS Markit said ISIS' average monthly revenue has plummeted by 80 per cent, from US$81 million in the second quarter of 2015 to just US$16 million in the second quarter of 2017.
"Losing control of the heavily populated Iraqi city of Mosul, and oil rich areas in the Syrian provinces of Raqa and Homs, has had a particularly significant impact on the group's ability to generate revenue," said senior analyst Ludovico Carlino.
As a result, ISIS was likely to shift its funding structure towards "a future insurgency through a real-war economy".