Negative savings in Jordan’s economy

There is no available data on domestic savings in Jordan’s economy. Most likely it is far less than expected.

The surpluses achieved by the private sector are offset by the government’s budget deficit. 

In other words, the government borrows the savings of families and the private sector through the banks, and spends them as current expenditure.

Several years ago, statistics showed that total consumption, private and public, is equal to 105 per cent of the gross domestic product.

This means that public and private consumption is equal to the overall GDP plus a given percentage, which is being financed by external sources, such as loans and foreign grants.

It is not known if this odd state of affairs has changed in recent years or to what extent. Who knows, the situation may have got worse.

The Department of Statistics ceased to produce national accounts on the basis that GDP is the total of consumption and investment, minus the trade deficit, i.e., the excess of imports of goods and services over exports.

Negative savings is an unusual case that can hardly be found in any country. It became possible in the case of Jordan due to the availability of external financial sources that cover the gap, most important of which are expatriates’ remittances, the proceeds of Arab and foreign grants and, of course, the growing balance of public debt.

This is a structural weak point in the Jordanian economy that happened under circumstances that do not exist in any other country.

Of course, we have no problem feeling free to consume goods and services that our own resources cannot afford as long as other sources stand ready to fill in the big gap, a state of affairs that may or may not be sustainable.

One might ask how come the economy is posting positive growth when Jordan is making negative savings.

Some analysts deny that Jordan is producing negative savings. However, the volume of public debt confirms the fact: borrowing is the opposite side of saving.

No one objects to the extensive remittances from Jordanians working abroad or to the substantial Arab and foreign grants that Jordan receives.

But what if these sources decline year after year, as expected, which will put the Jordanian economy in a difficult situation?

Can anything be done to face this uncomfortable situation? Are there any measures that can be taken to alleviate the situation?

What will the economic reform programme say about it?

Here one can ask if it is necessary for Jordanians to spend $200 million a month as tourists abroad. 

And what about the expensive Hajj and umrah practices, which consume poor people’s savings?

I am not for the imposition of restrictions, but at least something should be done to raise the cost of such practices using well-known means, such as taxes.