Holistic approach needed

The government recently announced a package of incentives to “stimulate” the stagnant real estate market under which the first 150 square metres of apartments sized 180sq.m. or less are exempted from registration fees. 

Prime Minister Abdullah Ensour announced at a press conference last week that the government has also started taking measures to stimulate the tourism sector, which is also suffering due to the regional turmoil.

Obviously government must have noticed that the national economy is rather weak, not only in the real estate or tourism sectors but also across the board in other areas. 

However, the piecemeal approach to the stagnant economy may not be the answer. Rather, it is the entire national economy that needs a holistic stimulus approach, including the industry and agriculture sectors. 

Not too long ago the Central Bank of Jordan lowered the interest rate by .25 basis points in order to encourage the extension of credit to would-be entrepreneurs, whether in the business of real estate or otherwise.  

Given the high rate of national debt, however, the government is ill prepared to launch a massive stimulus package to re-energise the economy from head to toe. 

The government is also dependent on sales tax and customs duties to replenish its coffers with money needed for the running costs of the state bureaucracy. 

The problem is that heavy taxation is a double-edged sword for while it would bring income to the government, it also stifles the economy and discourages people from spending. 

Although there is no easy fix for the economic recession, the existing policies and practices don’t seem to succeed in stimulating the national economy. 

As a rule, to stimulate any given national economy, taxes must be lowered across the board. When the public and the business community spend more, this in turn generates revenues for the government over and above the losses due to a lower taxation regime. This is what the government must do.