I. Introduction & General Context
Economic performance has held up well in a difficult external environment, with a narrowing current account deficit and international reserves remaining at a comfortable level.
The Syrian conflict continues to fester with no end in sight, and an escalation would weigh even more on Jordan’s already-strained resources (water, electricity, education etc.). Measurable negative spillovers from the conflict in Iraq have been limited so far (IMF). Nonetheless, a worsening of the situation could further affect exports (Iraq being Jordan’s second largest market after the US), transit trade, energy imports, and investor confidence; an influx of refugees is also possible should the situation there deteriorate. On the Palestinian-Israeli front, the Gaza conflict could also reignite, possibly hurting investor confidence. Moreover, there is continued uncertainty surrounding natural gas supplies from Egypt; a complete halt would give rise to additional fiscal gaps of about 1% of GDP (IMF).
Other risks include an undermining of the drive for reform in the country (IMF). There is also the exposure to global financial market volatility, which according to the IMF could result in capital outflows, while a slowdown in emerging markets could further reduce the prices of phosphate and fertilizers, thus adversely affecting the trade and current account balances.
Geopolitical factors aside, the single most important development affecting the Jordanian economy since the last quarterly update we published is the rapid plunge in oil prices (by nearly 50% since June and 40% since September. It is noteworthy, however, that futures markets suggest that oil prices will rebound, but that they will remain below the level of recent years).
There are four main channels through which a decrease in the price of oil affects a net oil importer like Jordan1. The first is the effect of the increase in real income on consumption expenditure. The second is the decrease in the cost of production of final goods (energy being an important component in that), and in turn on profits and investment. The third is the effect on the rate of inflation, both headline and core. The fourth is the effect of slowing growth in oil-exporting countries, which may reduce official transfers, FDI and remittances among other effects, especially over the medium term.
Meanwhile, the effect on core inflation depends both on the direct effect of lower oil prices on headline inflation, and on the pass through of oil prices to wages and other prices (IMF). The strength of the latter depends on real wage rigidities – the manner in which nominal wages respond to consumer price index (CPI) inflation – and the anchoring of inflationary expectations.
In the case of Jordan specifically, the economy is clearly being helped by lower oil prices, which will in particular decrease in the next few years the import bill and NEPCO’s losses, offsetting potential shortfalls in gas supplies from Egypt. Jordanian citizens will have more money to spend on non-fuel items, including on domestically-produced goods (the “consumption effect”). The benefits, however, could diminish over the longer term if cheaper oil reduces remittances, export and tourism receipts and FDI from oil-exporting countries.
Overall, the IMF sees the plunge in oil prices as a shot in the arm for the global economy, predicting a gain for world GDP between 0.3% and 0.7% in 2015, compared to a scenario without the drop in oil prices.
The status of a nation as a net oil exporter or importer will naturally influence its policy reaction to tumbling energy prices. Still, low oil prices create a common opportunity for both; an opportune environment to implement energy subsidy and tax reforms at low political cost, much to the delight of the IMF.
II. GDP
GDP Using Constant Market Prices (JD million)
As conflicts in Syria and Iraq continue to weigh heavily on the Jordanian economy, activity is gradually picking up, with the latest national accounts data suggesting GDP growth in real terms of 3.1%. In aggregate, the economy grew by just over 3% in 2014; 3.2% in the first quarter, 2.8% in the second quarter and 3.1% in the third (latest available). Since 2012, real GDP growth has averaged 2.75%; 2.7% in 2012 and 2.8% in 2013.
This pace, better as it may be, is clearly insufficient to create the jobs the country’s young population needs. Unemployment, therefore, is likely to remain stubbornly high, though to be fair the latest available data indicates that the rate of joblessness has declined to 11.4% in the third quarter (IMF). Yet, for several reasons, the recent fall in unemployment should not be taken as evidence of a job market on a roll, as there may be seasonal factors involved. As such, more time would be needed to verify the conclusion that unemployment is, in fact, on a downward trend. Meanwhile, Joblessness among women is consistently higher and rates for labor market participation in Jordan remain dismal.
With real GDP growth hovering around an estimated annual average of 3% in the first three quarters of 2014, per capita incomes are more or less stagnant. This does not help the fight against poverty and unemployment, with both remaining entrenched and extensive. To be fair, it should be noted that irrespective of any purely internal factors, turmoil in the Middle East has slowed down Jordan’s GDP growth.
In sum, IMF growth projections for 2014 have been revised down, from 3.5% to 3.25%, on account of lower investment and net exports. Growth is projected to increase gradually to 4.5% over the medium term, supported largely by public infrastructure investments.
III. GDP Sector Analysis
Looking at different sectors, growth in the first three quarters of 2014 was buoyed by a huge jump in real value added in the mining and quarrying sector, which expanded by 43.7% in the third quarter alone after smaller increases in the first and second quarter (7.1% and 1.6%, respectively). The sector enjoyed a number of strong trends, including higher international prices and increasing exports.
As the table below clearly shows, potash and fertilizer exports rebounded in the first ten months of 2014 (latest available).
Mining Exports (JD Million)
Potash
Fertilizers
Jan-Oct 2013
230.3
162.5
Jan-Oct 2014
365.4
257.8
Propped up by the Syrian influx, utilities (the combined electricity and water sector) grew by 4.7% in the first three quarters of 2014. The sector tends to move closely with increased output, population growth (including inward migration) and technological advancements.
Also exhibiting relatively strong performance was the construction sector, which grew by 7.4%; 6.5% in the first quarter, 3.2% in the second quarter and a solid 12.5% in the third quarter. The sector, which expanded by 8.7% in 2013, had contracted by 1% in 2012. Much of the sector’s growth can be attributed to the Syrian crisis and the influx of refugees to Jordan. Interestingly, for the whole of 2014 (latest available), the total number of permits issued for buildings construction (residential and otherwise) registered a drop of 7.4% year-on-year (y-o-y), from 34,311 to 31,774. Similarly, the total area of permits for buildings construction of all types fell by 24%. Other things being equal, this may suggest a reduced potential for future growth in construction activity.
As for the all-important manufacturing sector, preliminary value-added estimates for the first three quarters of 2014 point to a 1.6% growth rate in real terms. The sector had expanded by 2.3% in 2012 and 1.9% in 2013. This slowdown is partly due to fierce competition that had forced the sector to lower prices (IMF). In any case, the slowdown is questionable given the expected secondary demand on manufacturing products generated by the relatively rapidly expanding construction sector (7.4% 2014-YTD).
Also registering improving growth performance in the first three quarters of 2014 was the restaurants and hotels sub-sector, which grew by 2.5% compared to 2% in the same period in 2013. The latter has translated into higher travel (tourism) receipts in the balance of payments, with data for the first three quarters pointing to a growth rate of 8.8% y-o-y to JD2,408 million.
The numbers are contributing to a widespread sense that, following years of having growth constrained by the global economic slowdown and regional political unrest, Jordan’s economy has regained some momentum. It also reflects the fact that Gulf tourists are shunning war-torn Syria and the always-tense Lebanon.
Meanwhile, agriculture real value added is on the way to recovery, registering 3.1% growth in the first three quarters of 2014 (7.8% in the third quarter alone). In 2013, the sector shrank by 3.5%. The sector enjoyed an improved export performance, with official data confirming that Jordan’s exports of fruit and vegetables during the first nine months of 2014 increased by 14% compared to the same period in the year before.
Finally, part of the growth in the first three quarters of 2014 came from an unexpected source: taxes. Indeed, a look at the figures confirms this observation, with statistics for the first three quarters of 2014 putting the net taxes on products number at JD1,351.2 million, compared to JD1,314.2 million in the same period in 2013.
IV. Inflation
For the period ending November 2014, inflation, as measured by the CPI, rose by 2.4%. In 2013, inflation stood at 5.6%. The drop primarily signaled a slowdown in food, fuel and transportation prices, reflecting international trends and a base effect (the elimination of fuel subsidies in 2012 had triggered a one-off upward adjustment in fuel prices). As a result, the contribution of these categories to inflation declined from more than 5 percentage points in December 2012 to 0.8% in August 2014 (IMF).
Nonetheless, while headline inflation has certainly come down, core inflation –which excludes oil and food – remains elevated, exceeding 5% during the summer of last year (IMF). Yet again, this partly reflects increased demand by Syrian refugees.
While rent prices have been a main driver of inflation, recent trends indicate an acute spike in the price of clothing and footwear. The prices of other core goods and services have also witnessed a modest rise.
Interestingly, even when the effects of rents and clothing/footwear are ignored, core inflation still displays a marked increase, standing at 3.3% y-o-y in August 2014. This increase can be partially explained by increased demand stemming from Syrian refugees. Northern governorates bordering war-torn Syria have been most severely affected. Harboring one-fourth of Syrian refugees in Jordan, the Mafraq governorate, for example, saw rent prices increase by a whopping 77% between early 2012 to July 2014. To put that in perspective, rent prices in Amman increased by only 6% over the same period. This massive influx of Syrian refugees into Mafraq is also the chief reason why price increases in clothing/footwear in this governorate outstripped others. Price increases in clothing/footwear can also be attributed to the pass-through to consumers of the tax hike implemented in mid-2013.
According to the IMF, inflation projections for last year and next have been revised slightly upward on account of higher-than-expected core inflation in the first half of 2014. Headline inflation is expected to decline to about 2% over the medium term, aided by an expected moderation in international food and fuel prices, and a decline in core inflation as refugees gradually start returning back to Syria.
V. The External Sector
The external current account deficit (the broadest measure of trade, including services and factor income payments, as well as goods) narrowed significantly in the first three quarters of 2014 to JD1,391.3 million, or 7.5% of GDP for the same period. The comparable figures for the same period in 2013 were JD1,633.8 million and 8.8%, respectively.
The IMF had estimated the current account deficit to narrow in 2014 to 7.9% of GDP, which means that thus far performance (7.5% of GDP in the first three quarters) is better than initial expectations, as higher-than-programmed grants more than offset higher energy import costs.
For 2015, the fund expects that the current account would further narrow to 5.9% of GDP. This is based on the assumption of lower oil prices, which will in particular lower in the next few years the country’s import bill and NEPCO’s losses, offsetting potential shortfalls in gas supply from Egypt.
In brief, a sizeable increase in the all-important services account has been the single most important determinant of recent swings in the current account (see table below). Existing trade statistics in services cover three broad categories, namely transport, travel and “other services”. The latter category includes construction, communication, finance, insurance and other business services.
By contrast, net current transfers, which typically provide a safety cushion for the economy taking some pressure off the balance of payments, fell slightly to JD3,665.8 million, down from JD3,823.9 million recorded during the same period in the year before.
Current Account: Main Indicators (JD M)
2013 (1st Three Quarters)
2014 (1st Three Quarters)
Current Account, of which
-1,633.8
-1,391.3
Trade Balance
-6,176.0
-6,273.8
Services Account
907.4
1,417.1
Income Account
-189.1
-200.4
Current Transfers (Net)
3,823.9
3,665.8
On the commodity trade front, and despite the drop in oil prices, energy imports have remained high as supply disruptions of Egyptian gas have continued to affect the mix of energy imports toward more expensive sources of fossil fuel.
Meanwhile, inflows of foreign money in the capital and financial account have contributed to finance the current account deficit in the first three quarters of 2014 (latest available), which was in surplus to the tune of JD1,068.2 million. A closer look at the figures suggests that much of this surplus reflected flows of direct investment (JD975.5 million) and portfolio investment (JD935.8. million). It is noteworthy that the figure for direct investment was significantly down on its levels in 2013 (reflecting regional uncertainty) while the opposite is true for portfolio investment (which was up y-o-y).
In its most recent report on Jordan, the IMF predicts the current account deficit would continue to narrow over the medium term – to about 2.5% of GDP – helping keep foreign exchange reserve buffers at comfortable levels. This largely reflects a reduction in the energy import bill brought about by the coming on stream of the liquefied natural gas (LNG) terminal in Aqaba in mid-2015 and gas from Israel starting in 2018.
Finally, it is noteworthy that the current account deficit narrowed despite a further real appreciation of the exchange rate (IMF).
Workers’ Remittances
Migrant workers’ remittances rose by 2.2% in the first three quarters of 2014, reaching JD1,809.2 million, compared to JD1,769.6 million in the first nine months of 2013.
The importance of remittances to the Jordanian economy cannot be understated. Worker remittances form a credible source of supplementary income for Jordan. They significantly contribute to the country’s gross national product (GNP) and help bolster the Kingdom’s strategy for poverty alleviation, trade deficit reduction and access to hard currency. For the ordinary citizen, remittances help finance levels of consumption and investment above domestic incomes.
Commodity Trade
After three years of relatively stagnant exports, a recovery seems to be spreading. According to the Central Bank of Jordan’s (CBJ) Monthly Statistical Bulletin, domestic exports stood at JD4,699,176 million in the first 11 months of 2014, a rise of 6.3% from their comparable level in 2013. Re-exports, on the other hand, fell by 5.3% to JD719.7 million.
Clothes (JD757 million), vegetables (JD380.3 million), potash (JD361.8 million), pharmaceutical products (JD338.6 million) and phosphate (JD273 million) topped the list of domestic exports in the first ten months of 2014 (latest available).
On the opposite side of the equation, the US, Iraq, Saudi Arabia, India and the UAE served as the Kingdom’s five largest export destinations in the first ten months of 2014 at JD843.1 million, JD767.5 million, JD644.8 million, JD426.4 million and JD180.6 million, respectively. Among other things, this shows the reemergence of Iraq as a primary export market for Jordan. Needless to say, the upsurge of ISIS in Iraq poses several challenges for Jordan, many of which are on the export front and transit trade. It could thus be the case that the data currently available does not capture this effect, with more time needed to make firm conclusions (Already Iraq has slipped one spot since our last quarterly update, from Jordan’s top export market to the second spot, now preceded by the US).
Like exports, imports rose significantly in the first 11 months of 2014 (latest available) to JD14,872.7 million, up from JD14,266.2 million in the year before. Partly explaining this jump was the significant rise in Jordan’s energy bill. The latest figures show mineral fuels and lubricant imports (crude oil plus petroleum products) increasing by a significant 11.9% to JD3,835.2 million in the January to October period in 2014 (latest available).
Petroleum products (JD2,163.2 million), crude oil (JD1,396.3 million), transport equipment and spare parts (JD995.9 million), Textile Yarn, Fabrics, Made up Articles and Related Products (JD490.3 million) and Iron and Steel (JD442.5 million) topped the list of imported items into Jordan in the first 10 months of 2014 (latest available).
As for the top five suppliers of merchandise to Jordan in the first ten months of last year, the list (in order of value) includes Saudi Arabia (Jordan’s main supplier of energy, JD2,872.8 million), China (JD1,555.7 million), India (JD862 million), the US (JD859.1 million) and the United Arab Emirates (JD733.2 million).
The rapid rise in imports was enough to offset higher export earnings, resulting in a widening of Jordan’s trade deficit in the first 11 months of 2014, from JD9,084.4 million in 2013 to JD9,453.9 million as at end-November last year or 4.1% y-o-y.
To cut Jordanian trade deficits will require efforts aimed opening up new markets for Jordanian exports, particularly of services. Positive results may be achievable by paying more attention to Jordan’s services exports, including transport, telecoms, banking and insurance. In any case, it is notable that these sectors are developing in the general context of the Kingdom’s reform process, including privatization.
VI. Public Finance
Public Finance, 2009-2014 (YTD), (Red: Total Expenditures; Blue Total Revenues & Grants; Green: Deficit) (JD Million)
In the seven years since the global economic crisis struck in 2008, Jordan’s struggle with a widening budget deficit has become the talk of the town. Jordan, like other governments in the region, responded to the unprecedented demands of its population inspired by the Arab Spring by adopting expansionist fiscal policies. This was mainly done to fund a widening of state subsidies, public-sector hiring and salary increases. However, that policy, expected as it may have been, proved entirely unsustainable without significant foreign assistance and the IMF had to be called in. Complicating a fiscal picture further is the increased borrowing on behalf of Jordan’s state-owned NEPCO. This was mainly to accommodate more costly imported fuel oil during the extensive periods of interrupted natural gas supply from Egypt.
Fiscal consolidation started in mid-2012, reducing the primary central government deficit (including grants) from 8.3% percent of GDP in 2012 to 5.5% of GDP in 2013. The consolidation was anchored in a bold reform of general subsidies, including in the electricity sector.
Mostly occurring on the expenditure side and involving a freeze in public-sector hiring; reductions in the operating costs of public institutions and independent agencies; declining food and fuel subsidies (in this regard, the government has recently engaged in forward contracts to lock in currently low international wheat prices, which will reduce the costs of the food subsidy) and prioritization of capital spending.
Meanwhile, a closer look at figures in 2014 reveals that current expenditure rose in the first 11 months of 2014 (latest available), from JD5,500.5 million to JD6,067.4 million; an increase of 10.5%. More importantly, capital spending, with its positive effects on growth, rose by 23.4% to JD878.5 million.
Although civil employment has long been a source of livelihood for key social groups in the Kingdom, worker compensation (JD1,201.4 million in the first 11 months of 2014) is still a significant burden on the central government budget. In particular, it constitutes 17.3% of total expenditures in the first 11 months of 2014.
On the revenue side of the equation, the government is banking on the new income tax law, which will contribute to a fairer tax system. According to the IMF, the law would generate revenue largely from an increase in tax rates, bringing Jordan in line with other countries in the region. The full-year revenue gain is estimated at 0.6% of GDP, but only 0.3% of GDP would be realized in 2015 because the tax payment schedule is back loaded (IMF). While the law meets immediate fiscal adjustment needs, IMF staff felt strongly that the law is a “missed opportunity” and “will likely need to be revisited in the near future”. Yet it is the only option, in addition to reducing tax incentives, to provide substantial revenue while making the tax system fairer. Most importantly, lowering the exceptionally high personal income tax threshold would bring Jordan in line with peers, expand the base, and introduce more progressivity (as it stands only 3% of the Jordanian population pays income tax); indeed, Jordan has one of the lowest levels of revenue from this type of tax (IMF). The IMF also thinks there would be scope to introduce a minimum tax based on sales as a tool to address tax evasion, which is estimated at over 3% of GDP of the sales tax.
Better tax collection and higher grants were enough to offset increased expenditures, resulting in a reduction in the deficit to JD899.9 million from JD1,100.8 million in the comparable period in the year before.
Recent Fiscal Indicators (JD M)
1st 11 Months 2014
1st 11 Month 2013
2013
2012
2011
2010
2009
Total Revenues & Grants
6,055
5,111.6
5,758.2
5,054.3
5,413.9
4,662.8
4,521.2
Of which, grants
755.6
579.4
639.1
327.3
1,215.0
401.7
333.4
Total Expenditures
6,954.9
6,212.4
7,065.4
6,878.2
6,796.6
5,708.0
6,030.5
Of which, Current Expenditures
6,076.4
5,500.5
6,050.4
6,202.8
5,739.5
4,746.6
4,586.0
Of which, Capital Expenditures
878.5
711.9
1,015.0
675.4
1,057.1
961.4
1,444.5
Deficit (including grants)
-899.90
-1,100.8
-1,307.2
-1,824.0
-1,382.7
-1,045.2
-1,509.3
Deficit (excluding grants)
-1,655.50
-1,680.2
-1,946.3
-2,151.3
-2,597.7
-1,446.9
-1,842.7
Deficit (including grants) % of GDP
N/A
N/A
-5.5%
-8.3%
-6.8%
-5.6%
-8.9%
Deficit (excluding grants) % of GDP
N/A
N/A
-8.2%
-9.8%
-12.7%
-7.7%
-10.9%
The budget for 2015 will provide further fiscal consolidation, with the primary objective of putting public debt on a firm downward path. It will be complemented by sustained implementation of the energy strategy and is expected to be supported by the new income tax law. Continued adjustment will move debt onto the programmed downward trend, while new grants will cover higher electricity company NEPCO losses owing to lower Egyptian gas supply. At the same time, expectations are that losses of NEPCO will start declining in 2015, reflecting a tariff increase, in place since January, and the LNG terminal becoming operational in mid-year.
The largest drain on fiscal accounts is still electricity, but not for long. According to the IMF, electricity is expected to achieve cost recovery within a five-year horizon. Over the medium-term, however, prospects do not look so rosy. Gas shortfalls from Egypt are expected to persist at one-half of the quantity originally agreed to. It is anticipated that this will translate into additional loses for NEPCO estimated at 1.3% of GDP in 2015. Fortunately, the loss for the first two years will be offset by receipt of higher grants along with revenues from the sale of a telecommunication license.
Over the long-term NEPCO’s future looks brighter. The Aqaba Liquid Natural Gas (LNG) terminal will be operational by mid-2015. By the end of the year, renewable energies will also be introduced. In the more distant future (2018), Jordan may be importing gas from Israel, but that has been the subject of great controversy. The price charged for Israeli gas is projected to be substantially lower than the price of LNG, yet higher than the price paid for Egyptian gas. Together these contracts, should they be implemented, can cover rising demand for electricity and also lessen the need for tariff hikes from 2017 onwards. Still, the shortfall in Egyptian gas is expected to delay cost recovery by one year.
As the higher deficits are expected to be covered mostly by grants, the debt dynamics are broadly unchanged, with debt (net domestic debt of the central government plus external public debt outstanding) peaking in 2015 at 90% of GDP and falling to 77% of GDP over the medium term.
Jordan’s Total Debt Figures (JD Million)
2014 (Jan-Nov)
2013
Total Debt
20,704.9
19,096.6
% of GDP
N/A
80.1%
VII. Monetary Policy
Monetary policy will continue to maintain high foreign exchange reserve buffers. A combination of declining headline inflation, modest credit growth and a comfortable reserve position allowed the CBJ to reduce its overnight deposit and repurchase rates by 50 basis points in June, to 2.75% and 3%, respectively. Nonetheless, gross usable reserves continued to over-perform, reaching $14.4 billion at end-September (over seven months of prospective imports). Notwithstanding, and as abovementioned, private sector credit has remained slow, growing by 5.5% y-o-y through August. The recent reduction in policy rates has not yet been passed through to lending rates and regional uncertainty may dampen any impact on credit.
Meanwhile, the banking sector is performing particularly well. Profits are healthy, provisioning ratios have gone up (investments in conflict countries are now fully provisioned), and non-performing loans have gone down vis-a-vis 2011. Furthermore, according to banking sector data for June 2014, capital adequacy ratio has well exceeded the regulatory minimum. The healthy loan-to-deposit ratio allows banks to grow lending without resorting to external funding. In other words, banks also have robust liquidity buffers.
In a recent interview, Ziad Fariz, the governor of the Central Bank of Jordan, has said the banking sector’s performance was “good” in 2014 despite prevailing conditions in the region. He noted that credit extended by banks went up by 5%, and NPLs compared to total loans went down to 6.2% compared to 7% in 2013. Customer deposits increased by just under 10%, reaching JD30.3 billion, with JD6.2 billion held in the form of foreign currencies.
VIII. Reform Moves Slowly
After long deliberations, parliament adopted the Public-Private Partnership (PPP) and Investment laws. Also, the recently granted first microfinance license could open up access to finance to a broad range of small businesses and households (IMF). However, not everything has been fine and on schedule. For example, there has been a delay in establishing an automated system for Financial Soundness Indicators (FSIs) (June 2014 benchmark, met in September) and the licensing of a credit bureau (June 2013 benchmark) is now expected by end-year. Also, not all of the measures needed to bring about the fiscal adjustment for 2015 have been implemented.
IX. The Way Forward
Structural policies are needed to more forcefully move forward with the agenda for boosting growth and creating new jobs. Noteworthy are improvements in the quality of public institutions, the doing business environment and the labor market. On the latter, more needs to be done to re-examine public-sector hiring and compensation, helping new entrants to the labor market acquire skills needed in the private sector, and enhancing female labor market participation. In this regard, the government’s new medium-term economic strategy, Vision 2025, looks promising.
X. Conclusions
In 2014, economic performance has held up well in a difficult external environment, with conflicts in Syria and Iraq being exacerbated by the high cost of hosting refugees, disruptions to key trade routes (particularly with Iraq), and heightened security spending (due to participation in the war against ISIS).
Available GDP data suggest growth of just over 3% in real terms (first three quarters; latest available), an achievement given surrounding regional turmoil. Meanwhile, inflation, as measured by the CPI, has been falling, thanks to lower energy costs. Yet more good news is the narrowing of the current account deficit, which came despite disruptions to gas imports from Egypt and a decline in exports to Iraq due to the security situation there.
On the policy front, the CBJ’s foreign exchange reserves have continued to over-perform. At the same time, the central government budget has been well managed, with a notable drop in the fiscal deficit.
Looking forward to 2015, Jordan’s economy will benefit from lower oil prices. Savings from oil consumption will boost domestic demand and the purchasing power of citizens, helping to increase growth to close to 4%, according to the latest IMF estimates. The impact on the combined deficit of the central government and NEPCO will also be positive. Together with a prudent 2015 budget and the recently approved income tax law, the public debt can firmly be put on a downward path from 2016 onward.
As for the medium term, a key issue remains to push forward long-awaited reforms. Because Jordan’s public debt remains so high (almost 90% of GDP), there is an urgent need to unwaveringly adhere to the planned public sector adjustment, including continued deep tax reform and sustained implementation of the medium-term energy strategy. As well, more needs to be done to promote higher growth and to create new jobs, particularly for unemployed youth among whom the rate of joblessness is double the national average.
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