AMMAN —
Fitch Solutions of Fitch Rating Institution
expected in a special report that Jordan’s current account deficit will shrink
from 11.3 percent of the GDP in 2021 to 9.2 percent of GDP in 2022, Al-Mamlaka
TV reported.
اضافة اعلان
The reduction in
the deficit would be driven by an increase in services exports with the
reopening of the country’s tourist destinations, while the strong economic
growth throughout the
Gulf Cooperation Council (GCC) will boost remittance
inflow.
Rising foreign
direct investment and continued bilateral and multilateral support will enable
Jordan to finance the current account deficit, while the growing stock of
foreign reserves will enhance Jordan’s external standing.
In 2022, the
institution expects a recovery in tourist arrivals, expanding the surplus
services trade as Jordanian destinations reopen and as COVID-19 shifts further
towards an endemic situation.
At the same
time, the institution indicated that the flow of remittances would boost
surplus secondary income and offset the increase in the commodity trade
deficit.
The main driver
for narrowing Jordan’s current account deficit will be the strong arrival of
tourists while easing global travel restrictions of COVID-19, which will
significantly increase the surplus services trade, with tourist arrivals
expected to grow by 56.6 percent in 2022.
Fitch expected
the surplus in the account for trade in services to increase from JD274 million
(0.6 percent of GDP) in 2021 to JD1.6 billion (3.5 percent of GDP) in 2022,
where tourism will approach pre-pandemic levels in 2022.
The Fitch report
added that the reduction in Jordan’s current account deficit would be supported
by a gradual rise in remittance inflows, after a 3.6 percent decline in 2020,
and relatively low growth in 2021.
Fitch expects
transfers to rise towards pre-pandemic levels as more Jordanian citizens return
to the countries where they worked before the pandemic and economic activity in
these countries recovers, in particular
Saudi Arabia,
Qatar and the
United Arab Emirates, which are major sources of Jordanian transfers. Strong economic
growth in Jordan’s major trading partners such as Saudi Arabia (which captured
12.3 percent of Jordan’s exports in the first 11 months of 2021) followed by
the US (26.8 percent) is likely to boost exports.
However, it is
also expected that the rise in imports, and in particular the rise in oil
prices, would lead to the widening of the overall commodity account deficit,
where the rising oil prices in the light of the recent Russian attack on
Ukraine will increase the value of Jordanian imports.
Jordan would be
able to finance the current account deficit through a combination of increased
FDI and continued bilateral and multilateral support. While FDI growth was slow
in 2021, in 2022 FDI is expected to rise closer to pre-epidemic levels,
according to Fitch.
In addition,
Fitch expects to sign a new memorandum of understanding between Jordan and the
US soon. In February 2018, the US pledged $6.4 billion to Jordan over four
years, making Jordan the recipient of the third largest US foreign aid package
at the time. Therefore, it is expected that a similar amount will be pledged in
the short term as strong relations between the two countries continue.
Fitch asserted
that in addition to increasing financial flows, Jordan’s stock of foreign
reserves remains relatively large at $10.8 billion (eight months of import
cover), which will provide greater stability to the external situation of the
country.
Accordingly, the
institute expects that policymakers will have sufficient ammunition to protect
the long-term currency’s US dollar tie-up at 0.71 Jordanian dinars/US dollars.
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