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No high economic growth rates expected anymore

Aug 06,2017 - Last updated at Aug 06,2017

When it comes to measuring the growth rate of the Jordanian economy, there is some misunderstanding.

Growth is measured by comparing figures of the current year against the corresponding figures of the previous, as if the latter were ideal.

In our case, unfortunately, the previous year was very bad. Therefore, an improvement of, say, 3 per cent does not mean much, because it still leaves us below the level of growth experienced for years.

The growth of public debt over the last several years is an exception. It was high, leaving debt ahead of the economy in general.

Public debt was not growing only in absolute figures, but also as a percentage of the GDP.

Sometimes the government claims to have made great achievements simply because the debt/GDP ratio did not rise above the high level of the previous year.

The assumption is that debt was at a healthy rate the year before, which should be maintained as our standard.

In fact, keeping the debt rate at last year's level is an indication that the previous mismanagement is still with us.

Maintaining the same high debt/GDP ratio for some time is not what is needed, even though the IMF showed tolerance in the first year of the economic reform programme.

From now on, the debt/GDP ratio should start to decline steadily if we are determined to fulfil a major objective of the IMF reform programme.

Before the world financial and economic crisis that erupted 10 years ago, the annual rate of economic growth in Jordan used to stand at 7 to 8 per cent; a 10 per cent economic growth rate was registered in one of those good years.

It was only normal for Jordan’s open economy to be influenced by the world crisis. Growth rate dropped to a low level that we never thought possible.

At that stage, the policy was to protect the gains we had, rather than look for more.

The world crisis did not last for long. The world economy started to recover, albeit slowly. Low rates started to be seen as the “new normal”.

Even when the crisis settled, the economy did not restore the previous trend.

The programme agreed upon by the government and the IMF took this situation into account. New objectives are no more exaggerated. They are currently at a reasonable level whose achievement is no more unattainable.

 

They are practical and achievable. No excuses will be acceptable for not achieving them.

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