Kingdom’s debt to overshadow economic growth — WB report

AMMAN — The latest Global Economic Prospect report issued in January by the World Bank (WB) expects no acceleration of economic growth in Jordan due to the debt.

The report shows that high levels of debt “undermine” the effectiveness and ability to implement policies needed to address volatility, the ability to increase investment in human and physical capital, and the confidence of the private sector.

According to the report, the economic growth rate for the current and future years in Jordan will be approximately 2.3 per cent.

“The global economy is entering a pronounced slowdown amid fresh threats from COVID-19 variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies,” the report stated, noting that global growth is expected to decelerate from 5.5 per cent in 2021 to 4.1 per cent in 2022 and 3.2 per cent in 2023.

The rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term, the report showed.

Economist Hosam Ayesh indicated that the World Bank’s report shows that there are challenges facing the Jordanian economy, both global and national, such as high unemployment rates, poverty and more.

“The World Bank forecasts are likely to be accurate. It is certain that Jordan has not recovered from the repercussions of the COVID-19 pandemic since 2020 and its impact in 2021. The economic growth that occurred last year is less than the general growth rate between 2010 and 2019,” Ayesh told The Jordan Times on Wednesday.

Ayesh noted that there is a problem in the Jordanian economy, as seen by the World Bank, relating to the management of the economy and the high volume of indebtedness that the World Bank expected to reach approximately $50 billion by the end of 2021, which constitutes more than 114 per cent of GDP.

According to Ayesh, the main problem for the Jordanian economy is the disruption of the tourism sector due to the pandemic. 

“Although a large part of the losses suffered by the sector in 2020 were restored in 2021, the total tourism revenue compared to 2019 indicates a huge gap unfortunately,” he said, noting that in 2022, the spread of the Omicron variant and its spread around the world will limit the chances of tourism recovery in Jordan, and further affect the economy. 

He also noted the repercussions of the decline in the rate of economic growth, which is less than the rate of population growth. This leads to a continuous decline in the rate of GDP per capita in Jordan, which decreased in the last two years by 4 per cent.

“This decrease affects spending, which affects commercial activity and thus reduces expectations of better economic performance,” he added.

Ayesh encouraged the government to review multiple expenditures in the budget and reorganise spending priorities for 2022, as well as take into account that ways to confront the virus differ from previous years. He called for organising, monitoring and following up on expenditures so there is no waste.

“The world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful for developing countries,” said World Bank Group President David Malpassin in a World Bank statement.

Malpass indicated that putting more countries on a favourable growth path requires concerted international action and a comprehensive set of national policy responses.

Mari Pangestu, the World Bank's Managing Director for Development Policy and Partnerships, noted in the statement that the immediate priority should be to ensure vaccines are more widely and equitably available so the pandemic can be brought under control.

“However, tackling reversals in development progress, such as rising inequality will require sustained support,” Pangestu added.