Adaptive economic policies key to staying afloat amid global recession woes — experts

AMMAN — Although World Bank is forecasting global GDP growth to decline in 2023, the organisation is projecting Jordan’s growth to reach 2.4 per cent between 2023 and 2024.

The recent World Bank Group-issued Global Economic Prospects report indicates a sharp, long-lasting economic slowdown, with global growth declining to 1.7 per cent in 2023 from the 3 per cent figure that was expected just six months ago.

 “Given fragile economic conditions, any new adverse development —such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions —could push the global economy into recession,” the bank said in a statement accompanying the report.

Economist Hosam Ayesh told The Jordan Times that increasing interest rates, the Russian-Ukrainian crisis, the energy crisis and major slowdowns in advanced economies could foreshadow a new global recession. 

According to the report, global GDP growth is expected to pick back up to reach 2.7 per cent in 2024, not quite reaching the 2.9 per cent estimate for 2022.  Average growth for the 2020-2024 period will be under 2 per cent, which is the slowest five-year pace since 1960, the report added.

The International Monetary Fund (IMF) and government’s GDP growth forecast for 2023 expect a growth rate of 2.7 per cent, a more optimistic projection than the World Bank’s forecast. 

Current local economic challenges cited by the economist include the slow in GDP growth, increasing supply chain costs, increasing production costs and a global economic slowdown accompanied by a high global inflation rate.

Given the plethora of obstacles for the local economy, “our only fear is for our local economy to enter a ‘stagflation’ cycle, which is characterised by slow growth and a high unemployment rate, both accompanied by inflation,” Ayesh said. 

“Stagflation”, the economist explained, describes a combination of economic “stagnation” and high “inflation”.

 In light of such formidable economic challenges, “the government is urged to develop adaptive economic policies to ensure social protections for all income groups”, Ayesh said. 

Economist Wajdi Makhamreh told The Jordan Times that the effects of the global economic crisis will be felt by each and every Jordanian household. 

“The government is urged to incentivise investments, which will result in reduced unemployment that will eventually lead to avoiding the ‘stagflation’ dilemma,” Makhamreh said.

The combination of the high inflation rate, the slow economic growth rate and a steadily high unemployment rate are an “unfavourable” mix for Jordan’s economic future, the economist said.

The presences of such severe and concurrent challenges can be a dilemma for governments, since most actions designed to lower inflation may raise unemployment levels, and policies designed to decrease unemployment may worsen inflation, he said.

In order for the Kingdom to achieve the estimated GDP growth rate set by the World Bank, adaptive economic policies are necessary, Makhamreh said.