IMF Staff Statement at the End of a Mission to Jordan
“Jordan’s economy remains resilient in a difficult regional environment, with the conflicts in Iraq and Syria continuing to affect trade, tourism, and investor confidence. Nonetheless, growth picked up in the second quarter despite a slowdown in agriculture, and is projected to reach 2.5 percent this year and exceed 3 percent next year. Reflecting sharp declines in fuel and transportation prices, inflation is expected to drop to -0.7 percent this year (with core inflation at about 3 percent), before recovering to about 2 percent in 2016 as fuel prices stabilize. Owing to weak exports and tourism, the current account deficit (excluding grants) was about 0.5 percent of GDP in the first half of the year; it is projected at about 11.5 percent of GDP for 2015, lower than last year thanks to lower oil prices, and broadly stay at this level in 2016.
“International reserves are at an adequate level, while credit to the private sector continued to improve and banking sector indicators remained sound. The combined deficit of the central government and the electricity company NEPCO amounted to 2.8 percent of GDP during January–September, slightly higher than expected. This reflects a central government revenue shortfall of 1.3 percent of GDP, including from lower oil prices, which was partly offset by spending restraint. At the same time, NEPCO is close to reaching a balanced budget, owing to the further decline in petroleum product prices and increased LNG volumes for electricity production.
“Regarding policies in 2016 and beyond, we had constructive discussions on how to find the right balance between tackling Jordan’s economic challenge of raising growth and employment with the need to reduce its high public debt and current account deficit. Striking the right balance will require both structural reforms to boost jobs and growth, and sustained fiscal adjustment to reduce debt to safer levels. To help ensure that growth becomes high, sustained, and job-creating, structural reforms envisaged under Vision 2025 would need to address Jordan’s long-standing obstacles in the areas of business environment (including access to finance) and competitiveness, governance, public institutions, and labor market reforms. It will also be important for policies to bolster equity and fairness, including by requiring those with the ability to contribute their fair share to fiscal revenue and by creating a level playing field for enterprises. In this context, the design of fiscal adjustment must make room for growth-enhancing measures, such as by increasing capital spending, and for a gradual clearance of arrears. At the same time, it is critical that the international community continues to support Jordan through grants, including by helping the country bear the costs of hosting of Syrian refugees.
“The mission thanks the authorities for their cooperation and notes their strong commitment to seek support for their national program of economic reforms under the IMF’s Extended Fund Facility. We are looking forward to continue our constructive dialogue, including through a follow-up mission.”