Jordan needs to pursue fiscal consolidation to cope with a deterioration in public finances, even in the teeth of the public’s opposition to austerity, analysts Capital Economics has warned.
The London-based research consultancy claims the Middle Eastern country is set to walk an economic and political tightrope due to its economy contracting by 1.6 percent last year.
Analysis by Capital Economics claims the central government budget deficit, which had been widening even before the pandemic struck, reached 7 percent of GDP at the end of last year – the largest shortfall since mid-2013.
James Swanston, a Middle East and North Africa economist for the firm, said: “The deficit would have widened even further had it not been for several measures introduced by the government including the suspension of civil servants’ bonuses and a hiring freeze as well as postponing non-priority capital investment and a public sector wage hike.”
He added: "We estimate that, in order to stabilise the public debt-to-GDP ratio at its current level, a fiscal squeeze equal to 4 percent of GDP would be needed in the coming years.”
Jordan is unlikely to default as allies in the Gulf and Western countries would step in to provide financial support, Swanston concluded.
