Interview: Maen Nsour
How can you balance social welfare provision with long-term efforts to reduce budget deficits and the size of the public sector?
MAEN NSOUR: One of the foremost challenges facing the Jordanian economy is its budget deficit, which is expected to reach 6.2% of GDP in 2012. Budget shortfalls are mainly driven by increases in the trade deficit, which has grown due to the surge in global oil and commodity prices. During the first half of 2011, Jordan’s oil imports reached JD1.6bn ($2.25bn), making up about 24.4% of total imports.
Furthermore, due to unrest in Egypt, natural gas imports used primarily for electricity generation fell by 65% in 2011. This meant that the government needed to increase oil imports from 110,000 barrels per day (bpd) to 170,000 bpd.
In light of these problems, the government has adopted several measures to ration expenditures and redirect funds towards productive projects in line with national priorities, such as water, energy and transport. These projects should help maintain economic growth, enhance job creation and prevent vulnerable groups from turning into social risks.
Although budgetary issues provide a challenge, they should not come at the expense of social programmes. The recent financial crisis has shown the necessity of social protection, as countries that enjoy strong safety nets have been most prepared to handle shocks. Social protection works as a counter cycle for recessions, and acts as a stabiliser, securing a decent life for people and enhancing their capacity to manage economic risks.
Thus, the government has taken buffering actions to protect vulnerable groups by increasing social expenditures in 2011 to some JD2.39bn ($3.36bn), compared to some JD1.59bn ($2.24) in 2010, constituting 8.5% and 11.7% of GDP, respectively.
Lastly, I would like to emphasise that the government is planning to restructure the public sector by merging public institutions that have overlapping responsibilities. This will better serve budgetary interests by helping reduce operating costs.
In what ways has the Jordanian economy been affected by the events of the Arab Spring?
NSOUR: Like many other Arab countries, Jordan’s economy has been negatively affected by this political movement, especially at a time when the country is recovering from the global financial crisis. For example, total receipts from workers’ remittances fell by 4.2% in 2011 compared to 2010, reaching a value of some JD2.15bn ($3.02bn).
In addition, foreign direct investment fell by 11% over the year compared to the total achieved in 2010, from JD1.17bn ($1.65bn) to JD1.04bn ($1.47bn). Moreover, the unemployment rate in Jordan reached 12.9% – an unacceptably high level. Unemployment has affected all segments of society, but has primarily hurt our youth population, particularly those graduating from higher education.
The stock market has been particularly affected by the Arab Spring. The value of shares traded on the Amman Stock Exchange in 2011 was 57.4% lower than the value traded in the previous year.
In terms of individual economic sectors, the tourism industry, which has historically been one of the main growth drivers of our economy, witnessed a decline as a result of the Arab Spring. The number of tourists fell by 17.2% in 2011 compared to the year before. Additionally, the number of tourists from Gulf states dropped by 25.8% over the year.
Despite these challenges, our investment environment remains attractive. In the 2011 Economic Freedom Index published by the US-based Heritage Foundation, Jordan achieved a score of 68.9, a 2.8 point increase from the previous ranking, placing its economy 38th among the 179 countries included in the list. When calculating this index, one factor was investment freedom, in which the kingdom received a score of 70 – a five-point jump from 2010.
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