|Jordan's economy shrinks to 6 percent in line with forecast
|Jordan's economy shrunk from 7.2 percent in the first half of 2004 to 6 percent at the end of last year, according to the International Monetary Fund (IMF). But as The Daily Star revealed last week, Jordan needs to achieve 7 percent GDPgrowth to avoid the trap of poverty and marginalization.|
The 7 percent figure was based on forecasts by Lebanon's Banque Audi. This week, the bank said the 6 percent GDP growth was in line with its annual forecast published in the middle of 2004.
"While real growth has dropped from 7.2 percent to 6 percent in the first half of 2004, it still reflects a healthy improvement in almost all sectors of economic activity," Audi said.
Most economists agree that Jordan's economy got a shot in the arm after the U.S. invasion of Iraq two years ago.
"The analysis of major real sector indicators confirms a strong pick-up in activity during 2004," Audi said.It added that all major indicators have reported upward movements though at varying rates.
Imports grew by 41.5 percent year-on-year, exports improved by 28.2 percent, construction areas expanded by 21.8 percent, electricity production increased by 12.6 percent and cement production rose by 10 percent.
Audi said that amid this strong growth environment, unemployment fell to 12.5 percent and inflation was recorded at a moderate 3.4 percent rate.
"The rise in annual inflation by 1.3 percent relative to 2003 resulted partly from the pick up in economic activity, the government's increase of the General Sales Tax rate, and the rise in international prices of crude oil."
It added that there is no doubt that growth had a positive dual impact on fiscal adjustment in 2004, through both numerator and denominator effects.
"With debt to GDP representing the most significant indicator of financial vulnerability, growth has contributed to alleviate the deficit, the cause of debt growth, through a significant expansion in public revenues, mainly those that are at the mirror image of economic activity at large," the report said.
Audi expresses some concern about Jordan's high public debt to GDP ratio.
"With a debt to GDP ratio of 92 percent, against a regional average of 76 percent, Jordan still lies among relatively high indebted countries with an economy still relying on external grants," Audi said
The Daily Star