AMMAN: Led by Martin Cerisola, a team from the International Monetary Fund (IMF) visited Amman during 2–11 May to complete discussions on the 2017 Article IV Consultation and First Review under Jordan’s economic programme supported by an Extended Fund Facility (EFF) arrangement. At the end of this visit, Cerisola issued the following statement:
“Since our mission last November, macroeconomic conditions have remained challenging. Real GDP growth was 2 per cent in 2016, 12-month inflation accelerated to 4.3 per cent in March 2017 before receding to 3.5 per cent in April, and the current account deficit rose to 9.3 per cent of GDP in 2016. Against this backdrop, the unemployment rate continued to rise, particularly for youth and women, reaching 15.8 per cent in the second half of 2016, its highest level in more than a decade.
“In spite of challenging conditions, the authorities have managed to proceed with programme implementation, with a reassuring positive fiscal outturn in 2016 and progress in implementing several important structural measures, particularly with regard to the energy and water sectors and public financial and debt management. However, international reserves were below programme goals, while there were some delays in strengthening the business environment and in submitting legislation on deposit insurance and the insurance sector and, most notably, in implementing macro-critical structural fiscal reforms.
“The fiscal performance, which saw the combined public sector deficit decline from 7.1 per cent of GDP in 2015 to 3.8 per cent of GDP in 2016, was underpinned by the strong improvement in the performance of the National Electric Power Company (NEPCO) and in the primary balance of the central government, with a somewhat better-than-programmed outcome for the Water Authority of Jordan (WAJ). Nonetheless, with growth below expectations, the public debt-to GDP ratio increased to 95.1 per cent at end-2016.
“Looking ahead, domestic, regional, and global geopolitical and security developments are expected to continue to impinge on investor confidence, exports, investment, and public finances. Recent economic indicators are encouraging, pointing to a rebound in exports, remittances, and tourism in the first few months of 2017. But without significant improvements in regional conditions, real GDP is projected to grow by 2.3 per cent in 2017. Over the medium term, growth is projected to accelerate gradually, supported by structural reforms and fiscal consolidation.
“In light of the challenging environment and the need to preserve macroeconomic stability and enhance the conditions for higher and more inclusive growth, the discussions focused on the need to recalibrate policies and some of the structural reforms—particularly those aimed at establishing a more effective and equitable tax system. With the downward revisions to growth, public debt is now expected to decrease to 77 per cent by 2022, one year later than originally envisaged. Donor support, including through budget grants, remains highly critical to alleviate the persistent pressures from hosting Syrian refugees, and to help the authorities meet their programme’s debt reduction and inclusive growth objectives.
