Checks and economic growth and decline

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Reports show that the number of checks circulated in Jordan has declined steadily over the period of 2018 – 2020, and started to rise again, but at a very slow rate, in 2021 and 2022. Given that checks are the preferred debt payment method in the country, it is worth investigating the reason(s) behind this rise and decline, whether there is an emerging trend, and if so, can this information be of use to analysts and policymakers.اضافة اعلان

According to the Central Bank of Jordan (CBJ), the number of checks has declined from 16.18 million (numbers are rounded) in 2018 to 14.27 million in 2019, and 10.1 million in 2020.  The number of checks rose thereafter slightly to 10.17 million in 2021, and 10.27 million in 2022.  Hence the use of checks has declined significantly over the past five years by about 58 percent.

Looking at 2023, one notes that the number of checks has risen in the second quarter (1.59 million) relative to the first quarter (1.55 million checks). The total value of checks in circulation is JD9.77 billion in the Q2 of 2023, up by JD499 million from Q1 2023. The value per check has also increased from JD592 to JD614.

As to bounced checks, the number has decreased in absolute numbers from 51800 checks in Q1 to 50600 checks in Q2; however, as a percentage of total checks, there was a slight increase from 0.334 percent bounced checks to 0.375 percent.   The good news is that the value per bounced check has declined from JD6158 to JD4916.

One possible explanation for the decline in the use of checks provided by the CBJ is that alternative and more efficient payment methods to checks have grown in popularity in recent years. Hence, according to this explanation, the dominance of checks as a means of payment is finally being challenged in Jordan. But the negative trend stopped after 2020 as the number of checks began to increase, albeit at a slow pace. How can one explain such an anomalous trend using the simple explanation provided by the CBJ?

There may be another less conspicuous reason for such a pattern. In the years of 2018 – 2020, the per capita income in Jordan declined by 0.5 percent in 2018, 0.5 percent in 2019, and 3.7 percent in 2020. It’s also important to not that 2020, where the greatest decline in check usage occurred, also saw the greatest decrease in per capita income. On the other hand, 2021 and 2022 were years of positive growth in per capita income, 0.2 percent and 1.3 percent respectively, also witnessed a slight rise in the number of checks in circulation. Consequently, one could deduce that the number of checks in circulation per year correlates with the per capita income in Jordan, a correlation that is worth pursuing.

Given that data on the number and value of checks in Jordan is readily available, while the per capita income takes longer to estimate, it is worth using the number and value of checks as coincident indicators to predict the direction of the economy. The ease of determination makes such a tool almost a costless planning instrument that provides readily available indications of the direction of the economy.

Yusuf Mansur is CEO of the Envision Consulting Group and former minister of state for economic affairs.

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