Jordan's Draft 2021 Budget Projects 2.5% Growth

Jordan's economy is expected to shrink by 3 percent this year. (AFP)

Jordan's draft 2021 budget forecasts JOD9.9 billion (USD14 billion) in state expenditure and economic growth of 2.5 percent after the COVID-19 pandemic caused the worst contraction in decades, the finance minister said on Monday.

Mohamad Al Ississ told Reuters the cabinet had approved a budget that would accelerate IMF-backed reforms to help the kingdom restore fiscal prudence for a sustained recovery.

He said the budget would continue major fiscal reforms, including continuing an aggressive tax evasion campaign that has netted this year hundreds of millions of dinars for the country's strained state finances.

"Despite the unprecedented challenges, fiscal stability remains our priority," he said.

Ississ said the government would not resort to new taxes but a commitment to raise public sector pay that was postponed this year would push state spending, the bulk consumed by salaries and pensions.

Jordan's economy is expected to shrink by 3 percent this year, an improvement from an earlier 5.5 percent, the sharpest contraction in two decades. Before the pandemic struck, the IMF had estimated economic growth of 2 percent.

The government has given priority to cushioning the pandemic's impact on the poor by expanding a social safety net that has provided support to at least 2.5 million people, more than a third of the country's citizens, Ississ said.

It will help to ease the pain of the pandemic that has pushed unemployment to a record 23 percent, he added.

Although the kingdom has been more dependent than other regional economies on hard-hit sectors such as tourism and remittances, its commitment to an IMF-backed USD1.3 billion four-year program has helped to maintain external financing from major Western donors.

Jordan's commitment to IMF reforms and investor confidence in the country's improved outlook helped it to maintain stable sovereign ratings at a time when other emerging markets were being downgraded, the minister added.

Last week, Moody's affirmed Jordan's B1 credit rating, citing expenditure control and improved tax compliance. That followed a B+/B rating from Standard and Poor’s in September.