European bank aiding Jordan as growth forecasts lowered
Amman - Given the difficult regional environment and slowing global trade, as well as a contraction in the tourism and construction sectors, real gross domestic product (GDP) growth in Jordan is expected to rise from 2.4% in 2015 to 3% in 2016, less than the previous forecast of 3.5%, according to the European Bank for Reconstruction and Development (EBRD).
A slight improvement to 3.3% in 2017 is predicted to be driven by private consumption — supported by higher demand from the rising number of refugees the kingdom is hosting.
The kingdom’s economic outlook has also been lowered by the International Monetary Fund (IMF), which expects Jordan’s economy to grow 3.2% this year. The World Bank sees Jordanian growth at 3%.
The Jordanian government projects 3.7% growth in 2016.
According to the EBRD’s May Regional Economic Prospects report, the 2016 forecast for the southern and eastern Mediterranean (SEMED) region was downgraded to 2.9% from 4.1% in a November 2015 forecast. It expects a recovery to about 4% in 2017.
The EBRD has invested nearly $600 million across 22 projects in various sectors of the Jordanian economy since 2011, according to a statement from Heike Harmgart, EBRD head of office in Jordan.
“We are looking forward to further cooperation and being able to help with future challenges and opportunities in Jordan,” he said.
Projects in industry, commerce and agribusiness are getting 51% of their current portfolio of about $500 million, including undisbursed commitments, with 31% going for energy projects, 10% towards infrastructure projects and 8% being used for financial institutions, according to the EBRD statement.
“Fostering the role of the private sector is a key priority for the bank and Jordanian authorities,” Harmgart said. “Through our investments, we focus on financing SMEs (small and medium-sized enterprises), the diversification of energy sources using the kingdom’s potential for solar and wind power.”
Cash-strapped Jordan, which lacks the resources of its petroleum-exporting neighbours, is grappling with an influx of nearly 1.4 million Syrian refugees and tens of thousands of Iraqis and Yemenis who fled wars in their countries.
The newcomers, who swelled Jordan’s population nearly 25%, exhausted the country’s meagre resources, including water and electricity, and services such as health care and education. Foreign borrowing increased to 86.3% of GDP.
Addressing a key issue for Jordan by helping to alleviate the strain on water resources, the EBRD provided a loan of up to $14 million and mobilised almost $5.6 million in grants to the Greater Amman Municipality’s Solid Waste Crisis Response Programme to carry out urgently needed upgrades to the wastewater network.
“EBRD is focusing on the development of infrastructure and municipal services, which are especially pertinent and urgent now given the pressures on the present system due to the refugee crisis,” Harmgart noted.
With Jordan’s reliance on imported fuels running at 97-98%, the bank is enhancing energy sustainability, with two agreements in the works in 2016 and about $75 million in solar photovoltaic power plants in Jordan, while continuing to promote energy efficiency programmes and contribute to policy reforms.
“We should have two new energy diversification projects, the ACWA Sunrise Al Mafraq Solar PV and the Al Rajef Wind Farm, signed off on by year’s end. The projects have passed concept review and are now up for final review,” Harmgart said.
The bank, which extended support to Jordan in 2011 in response to international efforts to address the challenges after the “Arab spring” uprisings, issued $140 million to local banks for trade guarantees to promote the country’s foreign trade, Harmgart said.
During its 2016 annual meeting in May in London, the bank decided to provide Jordan with a share in a $110 million grant, taken from the profits of the bank, and extended to support countries affected by the Syrian refugee crisis.
The bank’s board also decided to have its 2018 annual meeting in Jordan in recognition of the kingdom’s humanitarian efforts and to highlight investment opportunities.
The Amman Chamber of Industry and the EBRD signed an agreement to help develop SMEs by providing administrative, technical and financial support. Through the EBRD’s Small Business Support, the bank has also initiated 145 technical assistance projects that directly benefit the kingdom’s SMEs.
“Conflicts in neighbouring Iraq and Syria have adversely affected trade and exports, which contracted by 8% in 2015, as well as tourism arrivals, and deterred foreign direct investment, which fell by a whopping 37%,” economist Issam Qadamani said.
“Despite strong growth in mining, phosphate, potash and utilities, the overall weakening of the growth performance was driven by a contraction in certain sectors, mainly restaurant, hotel and construction.”
He emphasised the importance of international support to continue implementing vital projects within the framework of the Jordan Response Plan 2016-18 come through.
“If donor pledges don’t see the light of day, the economy will be in big trouble,” he said.