Inflation at 4.1 percent; reliance on imports problematic — economists

(File photo: Ameer Khalifeh/Jordan News)
AMMAN — Economic experts unanimously agreed that Jordan’s reliance on importing a large number of its needs, including food and oil, contributed to raising the inflation rate to 4.1 percent.اضافة اعلان

Their statements come amid varying expectations about possibly another rise in the coming months, considering the high inflation rates recorded elsewhere, including in large economies such as the US.

Governor of the Central Bank of Jordan Adel Sharkas said recently that Jordan’s strong commitment to economic reforms has strengthened the international community’s confidence in the Jordanian economy.

He said Jordan succeeded, for a fifth time, in reaching an agreement at the expert level with the International Monetary Fund (IMF) regarding reviewing performance in light of the reform program that is proceeding in Jordan and supported by the Fund’s Extended Facility Agreement.

Sharkas revealed, in an interview with “Sixty Minutes” program, which was broadcast on Jordan Television Friday that the success in this review represents a clear message from the most important global financial institution, on the stability of the macroeconomic, financial, and monetary environment and the integrity of the economic approach.

He said the review yielded promising results, as the IMF raised its expectations for the performance of the Jordanian economy during this year to 2.7 percent, compared to 2.4 percent in the previous review, despite the fact that the fund, during the past month, reduced its forecasts for the growth of the global economy due to the continuing imbalances in supply chains and geopolitical developments.

Economist Mazen Irshaid told Jordan News that global inflation is expected to continue to rise globally, even beyond the 8 percent rate recorded in some industrialized nations. “In Jordan, it exceeded 4 percent, which is less than the global average because it is a small economy,” he said.

There are several reasons that led to the inflation, he said, “most notably the closures in China, and its impact on international trade and prices, as well as the Russian-Ukrainian (conflict) ... which led to a rise in prices, especially for basic commodities in Jordan, as it is an importing country”.

For example, “Jordan imports more than 95 percent of its energy needs at international prices, and this was a result that will be reflected in the inflation rates”, he added.

Moreover, “as for foodstuffs, Jordan imports more than 80 percent of its food needs, and with high shipping costs and slow supply chains, these reasons exacerbate economic burdens”.

He explained that, as a result, the Jordanian government has no options, “given that it imports most of its needs from abroad, and all that can be done is to raise interest rates to overcome inflation”.

Economist Zayyan zawaneh told Jordan News that the inflation rate in Jordan is acceptable so far, “and what the Governor of the Central Bank announced that the condition is better than many of what many countries are witnessing, is true”.

The reason for the non-increase in inflation is due to several reasons, he said. “The most important of which is the government’s implementation of His Majesty the King’s precautionary directives by raising the stocks of wheat, barley, and grains before their prices rise”.

“In addition to the rise in the private sector’s commodity stocks with prices before their rise, and the government’s control of shipping costs by setting ceilings for customs purposes, and the originally weak internal demand as a result of weak incomes”, he added.

He also said that the problem that the world is facing now is due to the results of the strict monetary policy imposed by the US Treasury Department on the world, and the possibility of the global economy entering a severe recession.

The signs of this appeared in the US with the decline in used car prices, interest rates on mortgages, layoffs in the technology sector, in addition to the contraction of the British and Japanese economies, and Europe’s suffering from the Ukraine war.

“We hope that the Central Bank will mitigate the wave of raising the interest rate on the Jordanian Dinar, to alleviate the burden of what is coming”, he said.

Economist Mohammad Al-Bashir, however, told Jordan News that the rate of inflation in Jordan “is not small, if we compare it with the stability of the domestic economy and the high costs”.

“Rather, this percentage reflects a problem in the structure of the Jordanian economy, as 65 percent of expenditures are current expenditures”, he said.

Bashir explained that the government has reduced some tax rates on some commodities and fixed the prices of some oil derivatives, but it soon raised prices in sectors such as real estate, “which contributes to high inflation”.

He noted that “we have to be aware that our economy is in a difficult and critical situation, as the trade balance is negative in favor of imports, in addition, the economy is witnessing a slowdown in the rate of growth, not to mention the growing unemployment crisis”.

He considered that this matter bears repercussions on average Jordanians, represented by manifestations of violence and crimes, “the economic situation is disturbing”.

“Also, the economic team cannot handle this matter alone, and it must participate in the formulation of decisions related to the economy”, he concluded.

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