Fariz sees Jordan regaining growth rates of previous years

AMMAN — Central Bank of Jordan (CBJ) Governor Ziad Fariz said Tuesday that the national economy could restore the growth rates achieved in the years after the global financial crisis, especially in the medium term.

Noting that the Kingdom succeeded in overcoming the repercussions of the hardest exterior crises during this period  Fariz said the International Monetary Fund (IMF) and the World Bank share this "positive view" with Jordan. 

Speaking at the annual meeting organised by the Association of Banks in Jordan, he said that the fund estimated economic growth rate in 2016 at around 3 per cent, expecting the momentum of regression in some external sector indicators to slow down while others improve. 

The new crisis lies in the security deterioration in Syria and Iraq, as their repercussions affect the Kingdom's economy, Fariz said, noting that nonetheless Jordan is dealing with the situation in a way better than before.

He also said that the budget and current account deficits, as well as the energy sector's losses, are a lot less than before. 

The reserves of the CBJ reached secure levels, which reflected on important market indicators including the dollarisation rate, which stood at  17 per cent compared to 24.8 per cent in 2012, according to the CBJ governor. 

The interest rates on government bonds for five years were 4.12 per cent compared to 7.75 per cent at the end of 2012, Fariz said, adding that the return on dollar-denominated government bonds issued last year currently stand at 5.3 per cent compared to 6.3 per cent when they were issued. 

Fariz said the decrease in fuel prices and interest rates generally will contribute in enhancing local demand and make up for part of the decline in external demand and the drop in the cost of debt service.  

He added that the results of the national reform programme appear in the recovery of the Jordanian economy from the pressures it faced since 2010, which reached the climax in 2012 in light of the global financial crisis, the increase of oil prices and the frequent disruptions in the pumping of Egyptian gas, which came in parallel with the repercussions of the Arab Spring and the influx of Syrian refugees to Jordan. 

He said that economic indicators showed an improvement in performance as the budget deficit decreased to 2.3 per cent of the gross domestic product (GDP) in 2014, the losses of the electricity company were addressed, inflation rates decreased and the current account deficit amounted to 7.3 per cent of the GDP.

As of 2015, Jordan started facing a new set of regional challenges, especially the security conditions decline in Syria and Iraq, which led to an almost full closure of the Kingdom's trade routes in the two countries, Fariz continued. 

According to the CBJ governor, it was expected from the beginning that 2015 was going to be a hard year on national economy, which was true as economic growth rate receded to 2.4 per cent in light of the varying decrease in national exports, tourism gains and foreign investments. 

Jordan was also affected by the repercussions of the decline in global oil prices, which affected national exports, expatriate remittances, Fariz said, adding that it was apparent in the drop of exports by 7.1 per cent, remittances by 1.5 per cent and not achieving the required level for the 2015 budget deficit.

He also said that the drop in exports and expatriate remittances continued in the first two months of 2016.

Positive indicators include lower oil prices, completing the liquefied natural gas port and several renewable energy projects, which all contributed to reducing the energy bill significantly to reach around 9.9 per cent of the GDP compared to 21.4 per cent in 2012.

The reform priorities for the next three years include addressing debt, the burdens of debt service, and conducting structural reform to stimulate growth and overcome poverty and unemployment, Fariz concluded.