‘Increasing, diversifying exports basket answer to Jordan’s economic woes’

AMMAN — Jordanian exports must be given special attention due to their impact on real economic growth and the reduction of unemployment rates, a study issued by the Jordan Strategy Forum (JSF) said recently, calling on the Kingdom to “diversify and increase the sophistication of its exports basket, as this is the only robust determinant of growth among standard growth factors”.

Entitled “The Jordanian Economy: The Challenge of Economic Growth and Development”, the report analyses the relationships between real GDP growth, public capital spending, exports and employment levels, considering that “the Jordanian challenge is to promote a real and sustainable economic growth, large enough to reduce the existing high unemployment rates”.

“The strong economic growth witnessed during the period between 1976 and 1979 has never been repeated,” the study said, adding that “more disappointing is the fact that since the healthy economic growth in 2000-2008, the performance of the national economy remains modest”.

“Growth remained low in the last quarter of the past year and it is unlikely that better results will be achieved in the first quarter of this year, proving that the results of the government’s actions have not yet emerged,” Economist Isam Qadamani told The Jordan Times in a recent interview.

“This is a reality that must be recognised not only because the economy needs to achieve higher growth rates, but also because it is not able to keep up with the population growth — even if the presence of Syrian refugees is excluded,” the economist added. 

Official figures indicate that total public spending to GDP ratio has fallen from 43.7 per cent (1976-1985) to 29.9 per cent (2016-2017), the study pointed out, warning that the involvement of the government in the national economy has been decreasing in the context of a slow economic growth, high unemployment rates and a young population pyramid. 

However, the overall results of the study appeared to be rather optimistic, showing that real GDP increases by JD1.14 per each JD1 invested in capital spending.

A stronger impact was recorded on the influence of exports in the GDP, with each JD1 worth of exports accounting for an increase by JD2.89 in the real GDP. 

In addition, the study found that the impact of real GDP growth on employment levels is positive, with the number of employed people increasing by a 0.6 per cent as a result o a 1 per cent rise on the real GDP.

“The Jordanian economy must achieve historically high and consistent real economic growth in order to reduce the hitherto high unemployment rates,” JSF Director of Research Ghassan Omet told The Jordan Times, explaining that “to a accomplish this, real exports and capital spending must increase at much faster rates than before”.

Considering the findings, the forum emphasised the importance of capital spending in promoting growth, “especially if well spent on public services like health, education, and transport”.

In this regard, the report highlighted that “a number of factors determine the impact of capital spending on real economic growth”, pointing out to the propensity to import, public debt, and marginal propensity to consume as factors to be considered. 

The study concluded that the government must “prioritise” and “quantify” Jordan’s needs for public goods’ investment projects in a comprehensive manner, adding that “if this is to translate into short-term trust, medium-term jobs and long-term competitiveness, growth, development, and confidence, this commitment must be well chosen and translated into action on the ground quickly”.

“The problem of the stimulus plan is the lack of funding,” Qadamani commented, noting that “the government hopes to cooperate with the local, Arab and international private sectors on innovative solutions that ensure that their results will turn into real growth — taking into consideration the budget deficit and the tax threshold”.