Unpromising early economic indicators

To evaluate the state of the economy at a certain point in time, and decide whether the subject economy is going in the right direction or otherwise, analysts depend on the available fiscal monetary, trade and other economic indicators.

It is unfortunate that most, if not all, early indicators, which were revealed at the outset of this year, were not pleasant and in some cases outright negative.

Part of these indicators is related to only the first month of the year, such as the budget performance figures, another part covers two months, such as the output and prices of industrial products and exports, and others cover three months, such as unemployment and inflation rates.

All the above-mentioned indicators were on the negative side: exports dropped by 16 per cent; domestic revenues declined by 4.4 per cent; current expenditures rose by 7.3 per cent; the number of incoming tourists was down; the rate of unemployment rose to 12.9 per cent; and the inflation rate was minus 0.9 per cent.

These troubling figures caused some observers to make sweeping judgments on the year as a whole. They wrongly concluded that the economic situation is deteriorating.

They blame some of these negative indicators on bad government policies, while others blame regional circumstances and the uncertainly that goes with it.

But a short period of one or two months is not enough to express an opinion on the year in its entirety.

It is not reasonable, for instance, to reach conclusions on the expected value of foreign grants based on the meagre receipts during the first month of the year, which showed a drop of 64 per cent.

We know for sure that Arab and foreign grants this year will approach JD1.5 billion, registering a growth rate of 20 per cent.

Likewise, it is not reasonable to take the negative inflation rate seriously against the credible institutions projections of a positive inflation rate of 2 per cent or more this year.

By no means do the above arguments try to play down the importance of the early negative economic indicators. On the contrary, these indicators call for the government’s attention to examine their validity and representation of the real position, and whether there are reasons, to identify them for investigation and possible remedies.

It may be reassuring to remind that the Jordanian economy is expected to grow this year at 3.8 per cent in real terms.

Of course, this is not an impressive rate of growth if compared to the high rates that were the norm several years ago.

Perhaps we have, from now on, to bring down our high expectations of economic growth, which used to be normal, to a new normal.

High economic growth rates cannot continue forever. They tend to decline gradually with time. Even the Chinese economy could not escape this rule.