Jordan: IMF Executive Board Concludes 2017 Article IV Consultation

IMF News, July 24, 2017

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Published: July 24, 2017

Overview

On June 21, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Jordan.
Press Release No. 17/291; July 24, 2017.
Summary finding: Jordan has made significant progress since the 2014 Article IV Consultation but pressing challenges remain.

Recent macroeconomic developments (2014–2016)

Real GDP growth decelerated from 2.4 percent in 2015 to 2 percent in 2016, ending the gradual pick-up seen from 2010 to 2014.
Slowdown in 2016 was broad-based: agriculture, construction, and mining activity slowed.
Inflation accelerated since mid-2016 to reach 4.6 percent (year-on-year) in February 2017, driven by recovery in global oil and food prices, increased fuel excises, and removal of general sales tax exemptions.
Inflation eased to 3.7 percent (year‑on-year) in May 2017.
Unemployment rate: increased to 15.8 percent in the second half of 2016 and to 18.2 percent in the first quarter of 2017, reflecting some methodological changes.
Current account deficit (excluding grants) was 12.6 percent of GDP in 2016, slightly higher than in 2015, reflecting regional challenges including the Syrian refugee crisis and the slowdown in the Gulf Cooperation Council (GCC), which affected exports, remittances, and other flows.
Central Bank of Jordan (CBJ) gradually increased policy rates since late 2016 amid increasing dollarization and higher U.S. policy rates; reserves stabilized at close to eight months of imports.

Outlook and projections (selected)

Indicators for early 2017 show recovery in exports, tourism receipts, and remittances relative to 2016.
Real GDP growth projected to reach 2.3 percent in 2017.
Inflation expected to stabilize at around 2.5 percent by year-end 2017.
Current account deficit expected to decline gradually, supported by structural reforms and fiscal consolidation.

Executive Board assessment and policy advice

Directors commended authorities for:
- Preserving macroeconomic stability and external viability.
- Reducing the fiscal deficit.
- Maintaining prudent monetary policy.
- Ensuring a sound financial system.
Directors acknowledged persistent challenges: below‑potential economic growth, high unemployment, and difficult social conditions.
Fiscal policy:
- Support for continued gradual and steady fiscal consolidation.
- Encouragement for authorities’ commitment to continue removing exemptions on the general sales tax and customs duties.
- Need to tackle tax evasion and increase compliance; rationalize expenditures while strengthening social safety nets; contain contingent liabilities and enhance oversight of PPPs; sustain reforms in the energy and water sectors; and improve debt management.
Monetary and exchange rate policy:
- General view that monetary policy stance is appropriate.
- Exchange rate peg considered an important anchor.
- Authorities urged to stand ready to increase interest rates if persistent pressures on international reserves emerge.
- Some Directors noted possible need to recalibrate policies to facilitate external adjustment over the medium term if challenging external environment persists.
Financial sector:
- Welcome for gradual adoption of Basel III and decision to complement it with an additional capital buffer.
- High levels of bank capitalization seen as providing buffers.
- Need to continue monitoring interest rate risk and rapid increase in household credit.
- Positive note on plans to strengthen supervision of insurance companies and microfinance institutions.
- Encouragement to strengthen implementation of the AML/CFT framework.
Structural and labor market reforms:
- Need for reforms to enhance competitiveness and inclusive growth.
- Development of a financial inclusion strategy, facilitation of credit, enactment of the secured transactions law to enhance access to finance and support investment.
- Simplifying regulatory processes and enacting the inspection law to improve the business environment.
- Advance reforms to lower the formal cost of labor to promote employment, particularly for young people and women.
Donor support:
- Directors called for greater donor assistance to help Jordan cope with the refugee crisis and support the program’s debt reduction and inclusive growth objectives.

Key indicators and projections (selected exact figures from the staff table)

Real GDP at market prices:
- 2014: 3.1
- 2015: 2.4
- 2016: 2.8
- 2017 (Prel.): 2.0
- 2017 (Projections): 2.3
- 2018: 2.5
- 2019: 2.7
- 2020: 2.9
- 2021: 3.0
Nominal GDP at market prices (JD millions):
- 2014: 25,437
- 2015: 26,637
- 2016: 27,972
- 2017 (Prel.): 27,445
- 2018: 28,705
- 2019: 30,170
- 2020: 31,759
- 2021: 33,497
- 2022: 35,365
- (continuation) 37,336
Nominal GDP at market prices ($ millions):
- 2014: 35,878
- 2015: 37,570
- 2016: 39,453
- 2017 (Prel.): 38,709
- 2018: 40,487
- 2019: 42,553
- 2020: 44,794
- 2021: 47,246
- 2022: 49,880
- (continuation) 52,660
Consumer price inflation (annual average):
- 2014: -0.9
- 2015: -0.5
- 2016: -0.8
- 2017 (Prel.): 3.3
- 2018 (Projections): 1.5
Consumer price inflation (end of period):
- 2014: 1.7
- 2015: -1.6
- 2016: 1.2
- 2017 (Prel.): 0.8
Unemployment rate (period average, percent):
- 2014: 11.9
- 2015: 13.1
- 2016: ...
- 2017 (Prel.): 15.3
Fiscal operations (In percent of GDP):
- Revenue and grants:
- 2014: 27.9
- 2015: 25.0
- 2016: 25.8
- 2017 (Prel.): 25.6
- 2018: 28.8
- 2019: 27.7
- 2020: 27.8
- Of which: grants:
- 2014: 4.9
- 2015: 3.2
- 2016: 3.8
- Expenditure 1/:
- 2014: 38.0
- 2015: 30.1
- 2016: 29.6
- 2017 (Prel.): 28.9
- 2018: 30.4
- 2019: 30.7
- 2020: 30.9
- 2021: 30.3
- Overall fiscal balance:
- 2014: -10.3
- 2015: -5.3
- 2016: -3.8
- 2017 (Prel.): -3.2
- 2018: -2.5
- 2019: -0.4
- 2020: -0.2
- 2021: 1.3
- 2022: 1.4
- (continuation) 1.6
- Primary government balance, excl. grants, NEPCO, and WAJ:
- 2014: -4.6
- 2015: -5.1
- 2016: -3.7
- 2017 (Prel.): -2.0
- 2018: -0.6
- 2019: 0.7
Government and government-guaranteed gross debt 4/ (percent of GDP):
- 2014: 89.0
- 2015: 93.4
- 2016: 94.4
- 2017 (Prel.): 95.1
- 2018: 95.6
- 2019: 93.5
- 2020: 90.8
- 2021: 86.2
- 2022: 81.6
- (continuation) 77.0
- Of which: external debt:
- 2014: 31.2
- 2015: 35.2
- 2016: 36.9
- 2017 (Prel.): 37.5
- 2018: 40.7
- 2019: 43.0
- 2020: 45.3
- 2021: 45.7
- 2022: 45.9
- (continuation) 45.4
External sector:
- Current account balance (including grants), percent of GDP:
- 2014: -7.3
- 2015: -9.1
- 2016: -9.0
- 2017 (Prel.): -9.3
- 2018: -8.4
- 2019: -8.3
- 2020: -7.6
- 2021: -7.0
- 2022: -6.4
- (continuation) -6.2
- Exports of goods, f.o.b. ($ billions):
- 2014: 8.4
- 2015: 7.8
- 2016: 7.5
- 2017 (Prel.): 8.2
- 2018: 8.7
- 2019: 9.3
- 2020: 9.8
- 2021: 10.5
- Imports of goods, f.o.b. ($ billions):
- 2014: 20.4
- 2015: 18.2
- 2016: 17.7
- 2017 (Prel.): 17.1
- 2018: 17.5
- 2019: 17.9
- 2020: 18.6
- 2021: 19.5
- 2022: 20.3
- (continuation) 21.1
- Oil and oil products ($ billions):
- 2014: 3.6
- Current account balance (excluding grants), percent of GDP:
- 2014: -12.6
- 2015: -12.3
- 2016: -12.5
- 2017 (Prel.): -11.7
- 2018: -11.3
- 2019: -10.4
- 2020: -10.1
- 2021: -9.7
- 2022: -9.5
Monetary sector (percentage change):
- Broad money:
- 2014: 6.9
- 2015: 8.1
- 2016: 7.6
- 2017 (Prel.): 4.0
- 2018: 4.4
- Credit to private sector:
- 2014: 3.7
- 2015: 10.2
- 2016: 10.1
- 2017 (Prel.): 9.1
Gross usable international reserves ($ millions):
- 2014: 14,973
- 2015: 15,678
- 2016: 15,888
- 2017 (Prel.): 14,454
- 2018: 14,778
- 2019: 16,003
- 2020: 17,268
- 2021: 18,330
- 2022: 19,501
- (continuation) 20,499
- In months of prospective imports:
- 2014: 7.9
- 2015: 7.7
- 2016: 8.6
- 2017 (Prel.): 8.8
- 2018: 8.9
- 2019: 8.9
- In percent of reserve adequacy metric:
- 2014: 136
- 2015: 130
- 2016: 122
- 2017 (Prel.): 117
- 2018: 120
- 2019: 125
Net international reserves ($ millions):
- 2014: 13,374
- 2015: 13,589
- 2016: 13,894
- 2017 (Prel.): 12,654
- 2018: 13,084
- 2019: 14,499
- 2020: 16,050
- 2021: 17,304
- 2022: 18,510
- (continuation) 19,637
Population (millions) 5/:
- 2014: 7.4
- 2015: 8.0
Nominal per capita GDP ($):
- 2014: 4,838
- 2015: 4,947
- 2016: 5,092
- 2017 (Prel.): 4,996
- 2018: 5,140
- 2019: 5,329
- 2020: 5,544
- 2021: 5,785
- 2022: 6,049
- (continuation) 6,331

Notes from the table:

1/ Includes net lending, transfers to NEPCO and WAJ, and other use of cash.
2/ Estimated amount of fiscal measures that will need to be taken by a given date to meet the program public debt reduction objectives.
3/ Defined as the sum of the primary central government balance (excl. grants and transfers to NEPCO and WAJ), NEPCO operating balance, and WAJ overall balance.
4/ Includes NEPCO and WAJ debt.
5/ Data from UN population division.
6/ INS data. CBJ staff's estimates, based on updated trade weights, shows a more moderate pace of real appreciation over the past few years.

Press Release No. 17/291, July 24, 2017, International Monetary Fund.

Jordan: IMF Executive Board Concludes 2017 Article IV Consultation

Source details

Other formats

Bibliographic details

Overview

Recent macroeconomic developments (2014–2016)

Outlook and projections (selected)

Executive Board assessment and policy advice

Key indicators and projections (selected exact figures from the staff table)

References