In recent years, Jordan's economy has
become a complex mix of contradictions, defying common beliefs and puzzling
observers. These puzzling inconsistencies have caused concern and prompted us
to pay close attention and be watchful. Today, we explore this economic enigma
to unravel its intricacies.
اضافة اعلان
The dilemma of economic growth and employment
An appealing puzzle is in the
connection between economic growth and employment in Jordan. Although
experiencing relatively moderate economic growth compared to peer countries,
Jordan has observed a perplexing decrease in the number of employed Jordanians.
This is not only about relative measures; it is an actual decrease in the
aggregate number of jobs available for Jordanians.
In 2022, the total size of employed
Jordanians declined by 3 percent compared to 2017, a time when the cumulative
economic growth reached 9 percent. This paradox presents a challenge to
traditional economic theories and raises fundamental inquiries regarding the
workings of Jordan's labor market.
Solving the puzzle
One potential reason for this paradox
could be a significant rise in productivity, indicating that current production
requires fewer workers. However, this notion does not have solid evidence of
structural alterations to support its validity. Although information regarding
gross capital formation in national accounts has been noticeably lacking
since 2016, data on the importation of capital goods suggests a decrease since
2018, with an annual decline of 2.5 percent.
“If economic participation remains constant at the 2017 level, the unemployment rate could climb to approximately 35 percent”
In addition, surveys on net job
creation disprove the idea that foreign labor is taking over and causing a
decrease in employment among Jordanians. The surveys indicate that
Jordanians still hold the majority of new job positions, which makes the
argument of foreign labor less convincing.
Unemployment: A complex situation
The effects of this conundrum on
unemployment rates are equally puzzling. The unemployment rate appears to
remain relatively stable, with changes within a limited margin, even when the
number of employed people has decreased and despite a large number of new
individuals entering the labor market. This can be mainly attributed to
the fall in economic participation rates, which have dropped by over 6
percentage points from 2017 to 2022. This indicates that the real unemployment
rate, assuming economic participation remains steady as in 2017, might rise to
almost 35 percent. The decline in participation suggests a widespread feeling
of hopelessness among job seekers, which is a concerning pattern that is just
as important as the unemployment rate.
Public finances: Two different narratives
Another contradiction arises in
the context of public finance. Although general budget statistics present a
relatively positive outlook, the significant rise in public debt indicates a
contrasting narrative.
The total deficit of the government,
which includes deficits of public entities such as the Jordanian Electric
Power Company and the Water Authority, amounted to over JD 6.2 billion
between 2018 and 2022. However, evidence shows that public debt increased by
approximately JD 8.4 billion within the same period, suggesting that the
deficit estimates provided are simply misleading, hiding the actual condition
of public finance.
“Growing dependence on foreign borrowing boosts foreign currency reserves, but carries significant future burdens”
The situation could become more
concerning if we explore how the deficit, primarily financed by external
borrowings, will affect Jordan's future fiscal position. Although it provides a
short-term boost to the country's foreign currency reserves, it will inevitably
place a burden on them when these loans and their services become payable. This
challenge is further compounded by Jordan’s focus on long-term borrowing during
a period when both local and international markets experience significant
interest rate hikes, although economists anticipate these spikes to be
temporary as inflation rates in the United States show signs of decline.
Dealing with the contradictions
Such economic and fiscal
contradictions underscore two significant deficiencies: a narrow focus on
misleading indicators and a tendency to defer challenges through policies. To
tackle these issues, policymakers must directly engage with complex questions,
conduct a thorough evaluation of indicators and implement genuine, structural
solutions that align with national priorities.
Unraveling Jordan's economic puzzle
is indispensable for enduring prosperity. The path forward requires
evidence-based policymaking, alignment with priorities, and robust governance
to ensure transparency, accountability, and the effective fulfillment of
promises.
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