Economists offer mixed views on Fitch Solutions report

(Photo: Jordan News)
AMMAN — The revised Fitch Solutions report, which suggested that Jordan's economic growth in 2022 would stand at 2.7 percent rather than 3 percent in light of the Russia-Ukraine conflict, resulting in higher inflation, reduced purchasing power, a drop in remittances, and an adverse impact on trade and tourism, has been met with mixed reactions by economists. اضافة اعلان

"The Russia-Ukraine conflict will likely affect Jordan through higher inflation on the back of elevated commodity prices, which will dent the contribution of private consumption and net exports," the report stated.

Economic and Investment Specialist Wajdi Makhamreh agrees with the report. He told Jordan News that estimations of economic growth are in decline compared to previous estimates.

"We barely got out of the COVID-19 pandemic impact, and the Russa-Ukraine conflict has started, further complicating the situation. The conflict has contributed to increased prices of essential goods like wheat and vegetable oil, as well as a rise in energy costs," Makhamreh said.

Political economy specialist Zayyan Zawaneh told Jordan News that the report “is rather optimistic and not very realistic,” and that 2 percent growth is unattainable under current circumstances as the world witnesses a crisis of such magnitude, with a backdrop of economic sanctions, inflation, disruption of supply chains, the spread of protectionism, scarcity of primary materials, increase in prices of all essential materials for production, and increased interest rates, “all of which would place people, governments and central banks under pressure, leaving all in front of conflicting options," said Zawaneh.

Zawaneh made reference to the British government's decision to reduce taxes on essential goods to support the survival of their people, noting that he foresees a global economic decline and the likelihood of a global economic downturn, again calling the forecast of 2 percent growth unrealistic.

Economic writer Salameh Al-Darawi told Jordan News that the first report issued by Fitch Solutions forecasting a 3 percent growth was false. He said that the report did not follow the Jordanian government's projected economic growth of 2.7 percent in 2022, adding that, “this has been estimated in the budget according to an agreement with the International Monetary Fund."

However, Darawi stated that the government's projection did not foresee the Russia-Ukraine conflict and the repercussions it would create, noting that Jordan will be directly and indirectly affected by the conflict. The immediate impact, he said, would be a rise in the prices of essential goods, which would increase inflation, and the indirect impact would be the lack of substitutes for critical goods like wheat, barley, and iron.

"Trade exchange between Jordan and Ukraine is weak; it is not concerning. But the atmosphere that the conflict is creating on an international level is concerning," Darawi said.

Economic analyst Mazen Irsheid told Jordan News that he expected the results of the revised Fitch report, and called the 2.7 percent projected growth is quite logical.

 "The impact of the increase in inflation internationally ought to affect the Jordanian economy, which will suffer from a massive increase in inflation. The longer the war continues, the bigger the risk on the Jordanian economy," said Irsheid.

Irsheid explained that since Jordan imports most of its essential needs, there will inevitably be a rise in prices, which would affect several economic indicators that add up to the gross domestic product, such as tourism, private consumption, and exports.

“It would be challenging to enhance the economic growth rate even after the war has ended, because the situation would take time to settle in light of economic sanctions on Russia.”

The sector most likely to be harshly affected, the economists agreed, is Jordan’s tourism sector, noting that a rise in global prices decreases purchasing power, and changes tourism from a priority to a luxury. The economists expect tourism, which makes up 20 percent of Jordan’s gross domestic income, to decline.

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