AMMAN — On Sept. 8, 2023,
S&P Global Ratings affirmed its 'B+/B' long and short term foreign and local currency sovereign credit
ratings on Jordan. The outlook remains stable.
اضافة اعلان
They are considering that Jordan's reform
momentum and donor support will remain strong, offsetting the risk that
external headwinds could undermine the country's fiscal consolidation
trajectory and push the already-elevated debt burden even higher.
Confronting difficulties
Jordan's economy has faced numerous shocks
in recent years, including spillovers from the Syrian civil war, the
COVID-19 pandemic, and the Russia-Ukraine war. These events have left a wake of
high unemployment, elevated public debt, and persisting strain from the continued
hosting of roughly 1.3 million Syrian refugees (about 11 percent of Jordan's
population).
Authorities have confronted these
challenges by focusing on structural reforms with the support of the
International Monetary Fund (IMF). Fiscal reforms focused on tax compliance are
bearing fruit, the S&P believe, while plans to address troubled
state-owned enterprises (SOEs) are rolling out. At the same time, efforts to rejuvenate
investment and improve the ease of doing business are underway, bringing with
them the prospect of sustainably increasing economic activity.
GDP growth
S&P expect GDP growth to rise
gradually, averaging 3 percent in 2023-2026. Last year, real GDP growth started
to outpace population growth, following over a decade of consistently shrinking
per capita incomes. However, social spending demands and infrastructure needs
will continue to weigh on the government's budget.
Inflation has largely been contained.
Prices increased by an average of 2.7 percent in the first seven months of
2023, compared with average annual inflation of just 4.2 percent in 2022. Price
pressure has been kept in check due to the peg with the U.S. dollar (which has
contained imported inflation). Rate hikes from the
Central Bank of Jordan (CBJ), which closely mirrors the U.S. Fed's monetary policy, have also helped.
Additionally, preemptive stockpiling of
key food staples and long-term and price-sticky gas import contracts have kept
household food and energy bills relatively stable. Combined, these policies
have muted some of the impacts from last year's commodity price shocks, which
under other scenarios could have affected social cohesion.
The debt-to-GDP ratio is shrinking, and
further progress will partly be tied to the authorities' ability to reduce
losses at SOEs. Strong domestic revenue performance has been underpinned by
successful efforts to tackle tax evasion and strengthen tax compliance, while a
rising interest`
Future ratings
S&P could raise the ratings if
Jordan's economic growth accelerated to a sustainably higher level, leading to an
increase in jobs in the private sector and in GDP per capita. At the same time,
a higher rating is also likely to hinge on whether the government is able to
reduce the government’s net debt-to-GDP ratio, which would likely need to stem
from further improvements in public sector fiscal consolidation.
They would lower the ratings if reform
momentum stalled, undoing fiscal consolidation efforts, for instance due to
rising domestic spending pressures. A negative action could also materialize if
the currently strong bilateral and multilateral donor support unexpectedly
diminished, provoking external financing pressures.
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