‘IMF’s lowered growth projections for Jordan realistic’

AMMAN — The International Monetary Fund (IMF) lowered its projection for Jordan’s economic growth from 2.5 per cent to 2.3 per cent in 2018, which economists said was “realistic” and “based on external and internal factors”.

In its 2018 Regional Economic Outlook: Middle East and Central Asia, which was issued this month, the IMF also lowered its projections for economic growth in Jordan for 2019, dropping it from its previous outlook of 2.7 per cent to 2.5 per cent.

The IMF report also anticipated a decline in the Kingdom’s consumer price index from 4.5 per cent in 2018 to 2.5 per cent in 2019, attributing those forecasts to the impact of regional conflicts.

Violent conflicts in the Middle East and central Asia impose vast humanitarian and economic costs, the report indicated, noting that, while the direct effects are concentrated in just a few countries — Afghanistan, Iraq, Syria and Yemen accounting for more than 90 per cent of conflict-related deaths in the region in 2017 — the indirect effects spill across the region.

It highlighted the challenges host countries, including Jordan, face in light of these circumstances and the huge flow of refugees it had created across the region.

In its reports, the IMF stressed that even if consolidation efforts go as planned in 2018, debt will remain very high in a number of countries such as  Bahrain, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Sudan and Tunisia, expecting it to remain above the 60 per cent vulnerability threshold for emerging market economies. 

A large section of the regional economy is dominated by low-productive informal sectors, with the formal sector accounting for only a third of employment in the region, the report claimed, adding that businesses with five or fewer employees dominate the private sector in Jordan accounting for about 40 per cent. 

However, the informal sector has difficulty accessing credit, market opportunities and government services, which limits the vibrancy of the private sector, the report continued, stating that tight labour market regulations impede firms from expanding and gaining economies of scale, constraining most small businesses to informality. Moreover, the government loses out on revenues since this sector remains largely untaxed.

“The IMF projections are realistic and accurate and take into account the current conditions,” expert in political economy, Zayyan Zawaneh, told The Jordan Times, voicing hope that “we will be able to achieve 2.3 per cent growth this year, as I believe it will be around 2.1 per cent only”.

“It is true that there are regional factors that affect our economy’s growth, but there are many internal factors such as the lengthy debate about the income tax bill and the fluctuation and uncertainties surrounding this bill,” he continued.

“The vagueness and uncertainties related to the bill are making investors confused whether to expand or wait and see, and this negatively affects economic activities and businesses,” Zawaneh noted, adding that such low growth rates are insufficient to create necessary jobs amidst high unemployment which exceeds 18 per cent, according to the latest official figures.

Economist Wajdi Makhamreh added that regional conditions are partly to blame for the “slow” economic growth.

“We have not benefited from the reopening of the borders with Syria and Iraq and it will take a while before we can witness tangible results,” he told The Jordan Times, noting that “there is also a decline in the volume of international aid extended to Jordan to help reduce the burden of hosting Syrian refugees, and this affects many sectors”.

Growth in the region is projected to reach 4.5 per cent in 2018, up from 4.1 per cent in 2017, before moderating to 4 per  cent in 2019, according to the IMF report.