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Jordan’s economy weathers Mideast unrest -finmin
Economy weathers unrest as capital inflows rise -finmin; 25 pct rise in oil bill to $4 bln strains budget deficit
June 18, 2011 2:38 by Reuters
Jordan has emerged relatively unscathed from Arab world unrest and the economy is on track to achieve a 3.5 percent growth forecast this year with recovering capital inflows, the finance minister said on Wednesday.
The kingdom, with a strong record of political stability, was capitalising on a reputation as a haven amid upheaval with Arab Gulf and other regional investors shifting hundreds of millions of dollars of capital into its $27.5 billion economy, Mohammad Abu Hammour told Reuters.
“We are seeing signs of capital inflows from the region and we expect more investment benefiting from our stability, good governance and progress in economic and political reforms,” Abu Hammour told Reuters in an interview.
Jordan witnessed weeks of protests earlier this year calling for political reforms, but has so far escaped the turmoil that spread across the Arab world since January and led to the ouster of longtime leaders in Tunisia and Egypt and violent unrest in Syria, Yemen and Bahrain.
A social safety net announced in January to offset high food and fuel prices raised spending by $650 million, but that would be offset by controls on other government expenditure and efforts to attract foreign capital through a new investment law in the pipeline, Abu Hammour said.
A 3.5 percent growth target this year in line with International Monetary Fund projections was still realistic, he said, seeing economic recovery gathering momentum despite regional uncertainty and the lingering impact of the global financial crisis.
Abu Hammour singled out the buoyant tourism sector which contributes 14 percent of the country’s gross domestic product, pointing that the sector grew 20 percent last year to 2.4 billion dinars ($3.4 bln) in receipts.
“We expect the events in a number of countries around us will boost tourism and we may witness a boom this summer,” he added, referring to Syria, where many Arab Gulf normally travel on their way to Lebanon.
The kingdom was also expected to benefit from strengthening ties with the Gulf as it begins talks with the Gulf Cooperation Council (GCC) on its membership request to join the oil producing bloc, Abu Hammour said.
Officials hope eventual GCC membership will give better access to Gulf markets for Jordanian exports and allow more labour flows to increase remittances beyond 2.58 billion dinars ($3.6 billion) last year, or 13 pct of GDP.
“Our GCC membership talks will be another step towards complementarities with the Gulf and we hope it will have positive impact for both sides and will be a win-win situation,” Abu Hammour said without elaborating.
The kingdom, already enjoying close business and economic ties to the region, received this month a $400 million grant from Saudi Arabia to help it improve its finances.
“This grant will help further consolidate our finances,” Abu Hammour said, adding that despite a projected 25 percent rise in the energy import bill to $4 billion in 2011, the deficit target of 5.5 percent of gross domestic product (GDP) was attainable.
Crude oil imports soared 46 percent in Jan-April alone to 641 million dinars, mainly after the disruption of Egyptian gas that supply 80 percent of the country’s electricity generation, forcing the kingdom to switch to much more expensive imported diesel to cover its electricity needs.
Abu Hammour said the fiscal outlook was underpinned by forecasts of higher foreign aid — that traditionally covers budget shortfalls — and more capital inflows along with revenue boosting measures, including raising electricity tariffs as of next July.
Abu Hammour said local revenues from taxes and other tariffs rose to 1.516 billion dinars in the first four months of the year, a 53 percent increase from the previous month.
The budget deficit in the first four months of 2011 stood at 148.6 million dinars, a 38 percent fall from the first three months of the year with higher revenues and grants.
“Our fiscal consolidation plan is on track despite the impact of a higher oil bill and more social spending earlier this year. There are positive signs the pickup in revenues and foreign grants are sustainable,” Abu Hammour added.