Slower economic growth in 2016

Several weeks ago, the International Monetary Fund (IMF) reduced its projection for the growth rate of the world economy in 2016 at 3.2 per cent.

This was the fourth time in twelve months that the IMF revised down its projection for the growth of the world economy.

On average, revision of growth projections is made once every three months, a rather short period for basing a projection.

One wonders what could have happened in such a short period to justify reducing the estimate for world growth and why all four revisions went in the same direction: downwards.

Is the world economy really deteriorating?

Most analysts were of the opinion that the world economy has finally left behind the great recession, which lasted for five years, and started to recover, albeit slowly, but the IMF seems to be of a different opinion.

IMF comes now to claim that the world economy will continue to slow down this year, and that the world economic recession did not go away but, if anything, it will worsen, in that economic growth rate in 2016 will be 0.2 per cent lower than was believed three months ago, to reach 3.2 per cent only, even after including the high growing economies of China and India.

According to the IMF, an annual growth rate of any economy below 3 per cent indicates a technical recession.

This means that only one fifth of a percentage point is now separating the world economy from a state of recession.

Regarding Jordan’s economy, there is near consensus that the economic growth rate this year will be lower than last year.

However, there is no agreement on how low it will be and what the actual economic growth rate will be in 2016.

In his budget speech six months ago, the miniser of finance said he expected the economic growth rate to rise to 3.7 per cent in 2016.

The IMF’s projection, two months later, was of about 3.2 per cent; it later revised this rate downwards, to 3 per cent, which means the situation borders a moderate recession. 

We should not be surprised if the IMF estimates the growth decline to reach 2.5 per cent or even less.

The World Bank thinks that economic growth this year will not exceed 2.3 per cent and the central bank gave yet the lowest estimate, of 2.2 per cent, which is very conservative.

Hopefully we will not be given other lower projections.

The economic growth rate in 2015 was 2.4 per cent; it was 3.1 per cent in 2014, indicating a negative trend that may have reached the bottom, after which it would resume growth at more reasonable level.

Our experts claim that 2016 will be a difficult year. This may be true, but was 2015 an easy year?

The regional state of affairs is now as bad as it used to be, and no more surprises are expected.

One thing, we can be sure of: the growth of the Jordanian economy will not be on the negative side in 2016.

Even in the most pessimistic projections, Jordan’s economy will achieve a positive growth rate, albeit not impressive.