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Jordan economy seen growing 4.25 pct in 2011 – IMF

The global crisis caused growth to slow to 2.3 percent in 2009.

January 7, 2011 10:12 by

Jordan’s economy is likely to grow by 4.25 pct in 2011 after slowing sharply due to the global crisis and its budget deficit should narrow slightly to 5.3 percent of GDP, the International Monetary Fund said.

The Fund gave the forecasts in an aide-memoire released on its website after a mission visit to the aid-dependent country during Dec. 13-19. It estimated 2010 gross domestic product growth at 3.5 percent, unchanged from earlier forecasts.

“The economic recovery remains on track, on the back of slowly rising domestic activity. Fiscal prudence and credible monetary management, reinforced by strong supervision and regulation of the financial sector, provide a solid platform for a more robust growth upturn in 2011,” the IMF paper said.

The government targets GDP growth picking up to between 4 to 6 percent during 2011 to 2013, saying there are already signs of recovery with higher exports and robust tourism revenue alongside stronger capital inflows and private investments.

The global crisis caused growth to slow to 2.3 percent in 2009, which was the weakest performance since an economic crisis in 1989 when the country was forced to seek help from the IMF.

This was in contrast to 7.8 percent growth in 2008.

The IMF estimated the overall budget deficit to narrow slightly to 5.3 pct in 2011, compared with an estimated 5.75 percent of gross domestic product last year.

The IMF’s deficit projection is higher than an official forecast of 5 percent outlined in the 2011 budget.

But the IMF said further fiscal consolidation would be critical over the medium term to bring fiscal and external balances to more comfortable levels.

The IMF mission said it backed the authorities’ proposals to reduce the overall deficit by between one-half and one percent of GDP per year and help achieve an overall deficit of about 3 percent over the medium term.

Minister of Finance Mohammad Abu Hammour told Reuters the the kingdom had made better progress than expected towards meeting its fiscal targets in 2010 with tough spending cuts.

Abu Hammour attributed an almost three percentage cut in last year’s budget deficit to fiscal consolidation, higher grants and better revenues as the economy recovers from the impact of the global downturn.

The kingdom posted a record deficit of 1.45 billion dinars ($2 billion) in 2009, or 9 percent of GDP, as public finances came under strain after the global downturn hurt domestic demand and foreign cash flows, including remittances from expatriates in the Gulf.

Officials said the budget deficit was worsened by years of big spending by previous governments fed by high aid levels and an investment and real estate bubble.

(Writing by Suleiman al-Khalidi; Editing by Ruth Pitchford)

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