AFAQ NEWS
Jordan’s economy is projected to grow by 2 percent in 2021 with a near-full economic reopening this summer, the International Monetary Fund said on Tuesday, slightly lowering its previous forecast of 2.5 percent.
In a report following the conclusion of the Second Review Under the Extended Arrangement Under the Extended Fund Facility, the IMF said the Jordanian authorities have successfully maintained macroeconomic stability, notably by meeting all key fiscal and reserve targets and made very strong progress on a large number of critical structural reforms.
Early success in containing the spread of COVID-19 has been challenged by two subsequent waves of the pandemic, the IMF said, adding that timely and effective fiscal and monetary policy responses helped contain the contraction in activity to 1.6 percent in 2020, shallower than the 3 percent expected at the first review.
Still, it indicated, unemployment has surged to a record 25 percent in Q4 2020, with youth unemployment at 55 percent. The impact on fiscal and external balances has been significant, with public debt reaching 88 percent of GDP at the end of 2020.
Nonetheless, despite the challenges from new virus variants and weaker tourism prospects, macroeconomic stability has been maintained, thanks to the authorities’ proactive policy stance, the IMF affirmed.
All quantitative performance criteria (QPCs) were met, and most indicative targets (ITs) have also been met. Progress on structural benchmarks (SBs) due for this review has been strong, including on streamlining the granting of tax incentives and closing tax loopholes. Regular information on COVID-related spending is being published, and an IMF Fiscal Transparency Evaluation was recently undertaken, the IMF report read.
In light of the weaker outlook for 2021, the report said that the IMF staff supports the authorities’ request for modification of the end-June 2021 QPCs to allow adequate space to protect the recovery, expand the social safety net, and address high unemployment.
The pandemic has significantly increased Jordan’s external financing needs (by about US$1.1 billion in 2021–22), mainly due to weaker tourism and services receipts, underscoring the criticality of continued donor financing, including to support Syrian refugees. Moreover, Jordan’s vaccination program, one of the first in the world to cover refugees, has recently accelerated.
“Monetary policy has been appropriately accommodative since the onset of the pandemic while supporting the peg. Moving forward, monetary policy needs to remain flexible and data
driven, balancing the need to entrench the recovery and maintain monetary and financial stability. While the financial sector remains sound, continued vigilance is warranted given that
it will likely take time for the full effects of the pandemic to be reflected in banks’ asset quality,” the report said.
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