Positive indicators, or are they?

During 2013 the Jordanian economy gave several indicators, some positive others negative.

Officials, naturally, like to dwell on the positive indicators. They wanted them highlighted to show that everything was going in the right direction and that they should be commended for their excellent performance and, consequently, should be allowed to carry on in leading the country to achieve the desired objectives.

Based on this understanding, the governor of the Central Bank recently presented the major economic and fiscal developments, concluding that the results were positive despite the challenges facing the country and that the challenges did not prevent the achievement of positive results, which became possible due to the wise economic, financial and monetary policies.

In its June 2 issue, Al Rai newspaper reported the governor as having said that the economy grew at 2.8 per cent in real terms, which is higher than the population growth rate of about 2.2 per cent, an indication that the per-capita income improved, albeit slightly.

The governor did not take into account the fact that Jordan’s population increased by some 15 per cent due to the extensive Syria influx of refugees.

Among other indicators cited by the Central Bank head was the substantial improvement in the current account of the balance of payments.

The deficit, he said, dropped from 15 per cent of GDP in 2012 to 10 per cent in 2013, still very high but representing a very important development in pushing towards self sufficiency.

The problem is that crucial to the improvement were the higher foreign grants; the balance of trade, which is the major component of the current account, posted a higher deficit as imports rose sharply, perhaps to accommodate the Syrian refugees’ consumption, while exports stagnated.

The governor also pointed out that the budget deficit as a percentage of GDP dropped from 8.3 per cent in 2012 to 5.5 per cent in 2013.

However, the real budget deficit in these two years was much higher if the cost of electricity and water subsidies is taken into account, instead of treating the losses as advances and showing them in the central government budget among the current expenditure, where they belong, which would have raised the real deficit to over 10 per cent of GDP, a very troubling ratio.

As expected, the governor did not forget to mention the rise of the Central Bank foreign exchange reserve to a comfortable level. This would have definitely been a positive indicator had it not been for the similar rise in foreign debt denominated in dollars.

Despite all of my above-mentioned reservations, the positive conclusion that the governor arrived at is generally true. Some progress was achieved despite unfavourable circumstances, and some negative points were averted.

The financial and monetary policies applied by the Central Bank and the Ministry of Finance went in the right direction, not to impress observers or achieve outstanding results, but to contain problems and setbacks.

In the atmosphere of the Arab Spring and the extremely turbulent regional circumstances, things could have been much worse. 

But in such circumstances, the government’s efforts should be exerted towards controlling damage rather than towards achieving gains.