Jordan expects to maintain post-Iraq war boom in 05

DEAD SEA (Jordan) — Jordan’s economy is expected to stay strong this year with growth of over 5 per cent fuelled by surging exports, construction and its role as a hub for Iraq, Finance minister Bassem Awadallah said yesterday.

By (Reuters)

Published: Sat 21 May 2005, 10:30 AM

Last updated: Thu 2 Apr 2015, 5:10 PM

Awadallah told Reuters the economy’s 2005 buoyant performance is making up for a fiscal outlook clouded by uncertainty over the extent of foreign grants to cover a budget shortfall.

The government has set aside an estimated 1.060 billion dinars ($1.4 billion) in grants in its 2005 budget - mostly in the form of oil supplies from energy rich Arab Gulf states.

“This year there is buoyant economic activity which is very encouraging and is being fuelled by exports, private sector investments, by growth in the services sector and the construction sector,” U.S. educated Awadallah said on the sidelines of a World Economic Conference at the Dead Sea in his first interview since he became finance minister last month.

Jordan’s robust economic performance has been underpinned by its growing role as a services hub for Iraq and by surging exports to the U.S.

“We expect (growth) to exceed a 5 per cent level,” Awadallah said, adding that last year’s 7.5 per cent growth was driven by a post-war boom after the end of the U.S.-led invasion of Iraq.

Increased business activity has led to forecasts of revenues from income tax and real estate sales being raised by more than 180-190 million dinars from the 2 billion dinars budgeted.

The kingdom’s economy, one of the most robust in the Middle East, is being driven by a surge in property and construction, a tourism boom and a healthy services sector.

“The preliminary figure for the first three months of 2005 indicate very good results. There is an equation between revenues and economic growth,” Awadallah added.

Jordan’s 2005 budget, the first since the end of its two year IMF standby arrangement ended last year, is worth 3.330 billion dinars ($4.697 billion).

Jordan’s budget shortfalls — traditionally covered by foreign grants — have grown as oil prices have risen, Awadallah said.

Last month, Saudi Arabia stopped the supply of some 50,000 barrels of crude oil per day supplied on a grant basis since last year.

Awadallah said that without the resumption of oil grants the kingdom could resort soon to additional aid from donor countries.

“The high prices of oil are causing Jordan, an oil consuming developing country, major fiscal problems which we hope we will be able to overcome through a combination of domestic measures and additional assistance from donor countries,” Awadallah added.

Jordan’s economy was cushioned from disruptions from the 2003 war by hundreds of millions of dollars in U.S. grants and by free oil from Arab Gulf states. They offset the loss of cheap Iraqi energy supplies Jordan relied on before the war. “If we get the grants that we expected then we don’t have a problem. We have to count on continued grants for the next few years in order to help us withstand the pressures of the rising oil prices,” Awadallah added. The cost of subsidising energy supplies at current oil price levels has so far risen to 425 million dinars from the 310m dinars estimated in the 2005 budget, Awadallah said. Jordan’s gradual oil price hikes over the last few years have sought to fully liberalise the sector.