50% of Jordan’s business will be indebted — World Bank

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Closed shops during the lockdown. (File photo: Ameer Khalifeh/Jordan News)
AMMAN — A new World Bank report predicted that around 50 percent of Jordan's businesses will be in arrears, warning that private debt will become public debt, according to Al-Mamlaka TV.اضافة اعلان

The report, which was issued Tuesday, indicated that companies in Jordan experienced a 50 percent decline in their sales due to the COVID-19 pandemic and that 40 percent of local companies were expected to be late in paying their obligations.

Despite the sharp decrease in revenue caused by the crisis, the proportion of nonperforming loans is still largely normal or below expectations, and this may be due to debtor grace policies and the mitigation of accounting standards that mask significant hidden risks that will only become apparent once the support policies end, according to the World Bank.

President of World Bank Group David Malpass said: “The risk is that the economic crisis caused by high inflation and interest rates will spread due to financial fragility. The tightening of global financial conditions and the shallowness of domestic debt markets in many developing countries could lead to crowding out private investment and weakening recovery.”

The need to expand growth-focused access to credit and capital allocation will enable smaller and dynamic firms — and sectors with higher growth potential — to invest and create jobs, said Malpass.

The report notes that the global public health crisis caused by the COVID-19 pandemic, has quickly turned into the largest global economic crisis in more than a century, which led to significant relapses in the growth path, increased poverty rates, and widening inequality.

The report called for universal access to finance to support recovery from this unprecedented pandemic; in low and middle-income countries, around 50 percent of households cannot maintain the same basic consumption level for more than three months in the event of loss of income, while average companies report that their cash reserves are sufficient to cover only two months’ worth of expenses.

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