Economic Analysis - Fiscal Stability To Strengthen As IMF-Stipulated Measures Take Effect - NOV 2017

BMI View: IMF-sponsored f iscal consolidation will lead to a narrowing of Jordan's budget shortfall over the years ahead - though progress will only be gradual, as Amman holds back on socially sensitive tax hikes and spending cuts. T he public debt- to-GDP ratio will begin to reduce from 2018 onwards and a shift towards external debt will see servicing costs fall .

We forecast Jordan's fiscal balance to narrow over the coming years - from 3.4% of GDP in 2016 to 2.8% in 2017 and 2.5% in2018 - on the back of IMF-stipulated austerity measures. While progress will be slow as the government looks to avoid fuelling discontent, it will facilitate a gradual reduction in the debt-to-GDP ratio from 2018 onwards. Meanwhile, the government's planned shift towards greater reliance on external, rather than domestic, borrowing, will lengthen average debt maturities and limit growth in servicing costs over the years ahead. We do not expect the government to experience difficulties in accessing external debt, as fiscal consolidation, accelerating economic growth and strong backing from key allies ensure international confidence in the economy is retained.

Deficit To Narrow Gradually

Fiscal Trajectory Will Improve
Jordan - Fiscal Position
e/f = BMI estimate/forecast. Source: BMI, national sources

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