Inflation expected to rise above World Bank figures, economists say

1. World Bank
World Bank (Photo: AFP)
AMMAN — The World Bank said in the Middle East Economic Outlook issued on April 14 that the inflation rate in Jordan is expected to increase to 3.3 percent this year, compared to 1.3 percent last year, while next year it can be expected to decline to 2.5 percent. اضافة اعلان

Economic experts interviewed by Jordan News agree with the World Bank’s forecast, especially in light of the significant increase in the prices of foodstuffs and goods brought about by the war in Ukraine, income insecurity, and the difficult economic situation.

Economist Mazen Irshaid told Jordan News that the World Bank predictions are logical, as the inflation rate before the war in Ukraine was 2 per cent, “but after the onset of the crisis, things have changed completely”.

He said that the “inflation rates may reach about 3.5 to 4 per cent if the crisis continues”.

Irshaid added that the rise in inflation depends mainly on the length of the war, “especially since we import from abroad most of our basic needs, including energy sources”.

He said that prices in the local markets began to rise about a month and a half ago, “which indicates that a significant increase in the inflation rate is likely to happen”.

“As for the solutions to mitigate the impact of inflation, monitoring the markets and setting price caps on basic goods can help, but I can say that, in general, there are no quick and radical solutions,” he added.

According to Irshaid, food security in Jordan is threatened, “which confirms the importance of developing long-term plans that enhance export and self-reliance, and reduce imports, so that Jordan is able to confront external factors that would influence the increase in the rate of inflation”.

Economist Mohammad Al-Bashir told Jordan News that a rise in the inflation rate to 3.3 percent is very likely, “based on the fact that the income is stable and prices are rising at the same time”.

He said that the “purchasing power of citizens is a real indicator of the inflation rate”, stressing that the Ukraine war and the COVID-19 pandemic are two important issues that contributed to aggravating the economic crisis in Jordan, which suffers from economic problems, clearly shown in the balance of trade, where the import bill is really large”.

Bashir added that “we still rely on imports and do not give importance to exports”, and that growing prices and costs, most notably the sales tax and the energy cost, and the high rate of social security deduction from workers’ salaries were instrumental in the companies’ reluctance to export.

He stressed that under the current circumstances, and if the war continues, “inflation rates may reach about 5 percent”.

Economist Zyan Zawwaneh told Jordan News that while inflation rates are affected by external and internal factors, “what really affects us nowadays are external factors like high prices of production inputs and the high prices of basic needs that we import”.

He said that “there is a real fear” that stagflation could occur, “which happens when there is a raise in prices and inflation rates, and lack of demand. This is one of the most serious types of economic problems that is difficult to address”.

“What is really difficult is that Jordan has been suffering from economic challenges for many years, including the high unemployment rate and high water and energy bills, and this interacts with the drivers of inflation rates and creates very difficult economic conditions,” he said.

According to Zawwaneh, “what is really unfortunate is that successive governments were unable to develop solutions that truly address the economic challenges. The government must immediately start developing medium and long-term plans to reduce imports and increase reliance on exports”.

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