Syria, Egypt and Iraq affecting Jordanian economy: IMF

Events in neighbouring countries are creating a challenging environment for Jordan which is nevertheless expected to record higher growth and lower inflation in 2014, according to a statement issued on 23 June following an IMF mission to the kingdom.

“Jordan’s economy is gradually picking up, with growth expected to increase to 3.5 per cent in 2014 from 2.9 per cent in 2013,” the statement quoted IMF mission chief Kristina Kostial as saying.

She said the annual inflation drop is forecast to fall to 2.5 per cent by the end of 2014 from 3.3 per cent at the end of 2013. The current account deficit, excluding grants, continues to decline.

“Still, the external environment remains difficult, with the conflict in Syria weighing on Jordan’s economy, gas inflows from Egypt subject to fluctuations, and the recent turmoil in Iraq adding another layer to regional uncertainty,” Kostial said.

She said the IMF-supported program has stayed broadly on track in the year ending march 2014. The central government deficit remained in line with its programmed target and central bank reserves exceeded theirs, Kostial said.

“We are pleased that the Jordanian authorities reiterated their commitment to the programme, including by safeguarding adequate reserve buffers in the face of an uncertain environment,” Kostial said.

“ is important to strengthen the agenda for stronger growth and more jobs, including by improving the business climate; revisiting public sector hiring and compensation; equipping new entrants to the labour market with skills needed in the private sector; addressing the constraints to female labour market participation; and enhancing the quality of institutions,” she said.

Kostial said she hoped that Jordan’s parliament would soon pass a new income tax law. “This will help Jordan sustainably pay for its needed social programs; bring its tax system more into line with regional peers; and force those who are not paying their fair share to pay more,” Kostial said. “Reforms aimed at eliminating tax exemptions and improving tax administration are also key in this regard.