The conflict in Syria and related large refugee inflows; high energy and food prices; and lower gas inflows from Egypt, have put pressures on Jordan’s external and fiscal positions.
“Risks to the economic outlook remain, but the improvements in the fiscal and external accounts are encouraging,” the IMF official said.
“Despite a difficult external environment, Jordan’s economy has been performing well. Growth in 2012 is estimated to have increased to 2.8 percent while inflation has recently eased to 6.7 percent. Higher energy imports led to a widening of the external current account deficit, but that was offset by a stronger capital account,” she added.
The IMF official stressed that the central government performance was on track and the electricity company was in line with expectations and that the Central Bank of Jordan had managed well the temporary pressure on reserves in the fall of 2012.
With the receipt of sizeable grants from GCC countries, a successful dollar-denominated domestic treasury bond issuance, and increased preference for dinar denominated deposits, international reserves now stand at a comfortable level, she continued.
Talks with officials focused on medium-term policies for boosting growth prospects while strengthening fiscal and external positions—key objectives for the authorities’ program.
“We expect economic performance to be better in 2013. We agreed that near-term efforts should focus on further strengthening Jordan’s fiscal situation in a socially acceptable way, restoring the electricity company’s financial health, and further rebuilding policy buffers. This should be complemented by continued structural reforms aimed at improving the business environment, enhancing transparency, fostering trade, and improving labor-market skills through education and training,” she said.
Jordan has applied for $1 billion-plus loan from the IMF to address a budget deficit caused mostly by the energy burden, among other factors.