GDP grows by ‘modest’ 2% in first quarter

AMMAN — Jordan's gross domestic product (GDP) grew by 2 per cent at the fixed market prices in the first quarter of 2015, compared to the same quarter of 2014, according to the Department of Statistics (DoS).

Most sectors recorded growth, with the extractive industries sector achieving the highest growth rate of 10.1 per cent, according to a DoS statement issued on Thursday.

Experts described the rate as “modest” and a sign of a slow year. 

The agriculture sector came second with a growth rate of 7.7 per cent, followed by the private services sector (6.3 per cent), the financial, insurance, real estate and business services sector (3.7 per cent) and the social and personal services sector, which recorded 3 per cent.

Although the contribution of the construction sector reached 6.5 per cent during last year's first quarter, it registered a negative growth by 3.4 per cent over the same period this year.

Experts and economists said the "modest" growth does not rise up to the projections of the International Monetary Fund for Jordan's GDP to increase to about 3.5 per cent in 2015.

Senator Jawad Anani said growth figures reflect the beginning of a "clear slowdown”.

He explained that Jordan imports goods from EU countries and Japan in euro and yen respectively, the value of which has recently dropped, while Jordan calculates its GDP based on the consumption, investment and government expenditures, and the difference between imports and exports in Jordanian dinar.

"The GDP growth looks bigger than what it really is," he said, expecting real growth in GDP in the first quarter to be limited to 1 per cent.

Moreover, he cited an issue with cash preference for Jordanians, who are holding on to cash out of fear of the political situation in the region.

“Those who have money refuse to lend it and those in debt refuse to pay,” he concluded, expecting the GDP not to register any growth in the second quarter of this year.

According to Anani, a former Royal Court chief and several-time minister, the government should reduce routine procedures and encourage competitiveness in order for sectors lagging behind, such as construction, to pick up.

“The government has not done much for the investment sector. In fact, some of its practices are extremely anti-investment,” he told The Jordan Times over the phone, noting that the only redeeming thing for the government to do is to increase expenditure in capital projects.

Economist Zayyan Zawaneh agreed, adding that the Central Bank of Jordan is keeping around $2.5 billion from the Gulf Cooperation Council’s fund as reserves, which should be employed in funding major projects in tourism, energy and transportation.

“There is no point in accumulating reserves at the expense of boosting the Kingdom’s economic activity,” he said, adding that several development projects were not implemented over the past three years due to the lack of funding.

Although the first quarter of any fiscal year usually witnesses humble GDP growth rates as the cycle of capital expenditures is not complete, Zawaneh does not expect GDP growth to grow over 2.5 per cent by the end of 2015.

He cited the delay in endorsing the state budget and the regional crises, such as the closure of the border with Syria and the complications at the border with Iraq, as contributing factors to the “critical” GDP growth.

Meanwhile, the GDP growth indicator is “deceiving” if taken in isolation from the distribution of GDP. Growth would be ineffective if it only affects the lives of 5-10 per cent of the population, he explained.

As the regional situation keeps complicating further, Zawaneh said the need for serious government efforts that rise up to the challenge is needed more than ever.

“It was very important for Jordan to enforce its presence in the tourism sector since 2011 as political conflicts emerged in the competing countries in the region, but nothing was accomplished, he said, adding that the government’s responses are usually “late and ineffective”.

Meanwhile, he called on the government to be more responsive to the needs of the construction and housing sector, especially in light of competition of countries like Turkey.