Jordan’s economic outlook positive — IMF

AMMAN – Oil prices slump could be a double-edge sword for Jordan's economy, but the economic outlook remains positive, accordaing to the International Monetary Fund (IMF) on Monday. 

IMF Mission Chief to Jordan Kristina Kostial said the Kingdom's economy is being helped by lower oil prices, which she said would in particular lower the import bill in the next few years and the financial losses of the state-owned electricity company, offsetting potential shortfalls in the gas supply from Egypt. Jordanian citizens will have more money to spend on non-fuel items, including on domestically produced goods. 

However, Kostial said the benefits could diminish over the longer term if cheaper oil reduces remittances, export and tourism receipts and foreign direct investments from oil exporting countries.

The IMF official made the remarks in a statement issued Monday following the conclusion of a several-day staff visit to the Kingdom.

The IMF believes that Jordan’s economy is on a path to stronger growth next year, though regional conflicts in Syria and Iraq continue to weigh on its economy. 

“The economic outlook is positive. Growth is expected to increase to 3.8 per cent in 2015 while the current account would further narrow to 5.9 per cent of the GDP," she added.

The IMF projection for economic growth is lower than the forecast of the government, which based its 2015 draft budget law on a 4 per cent expansion in the GDP. 

Growth is expected to increase to 3.1 per cent this year while unemployment has declined to 11.4 per cent in the third quarter. Inflation has also declined — primarily reflecting a slowdown in food and fuel prices — and stood at 2.4 per cent year-on-year in November. The current account deficit continues to narrow and is estimated at 7.9 per cent of the GDP for 2014 as a whole.

On the IMF-supported economic reform programme under a Stand-By Arrangement, Kostial said the programme is expected to remain broadly on track. The central government budget has been tightly managed, and international reserves remain at comfortable levels, the statement said. While the National Electric Power Company is affected by shortfalls in gas flows from Egypt, this is expected to be broadly offset by lower costs of oil imports.

She noted that the IMF team held “constructive discussions” on macro-economic policies for 2015, adding next year’s budget will provide further fiscal consolidation so as to put public debt on a firm downward path. 

“It will be complemented by sustained implementation of the energy strategy and is expected to be supported by a new income tax law, which will contribute to a fairer tax system. Monetary policy will continue to maintain high foreign exchange reserve buffers,” Kostial said.

According to the IMF official, the next mission to review Jordan’s economic performance is scheduled for early March 2015.