Economic Analysis - Austerity Measures To Lower Debt Ratio From 2018 - 22 MAY 2017


BMI View: Jordan ' s public debt will reduce as a proportion of GDP from 2018 onwards, as austerity measures and sizeable foreign aid inflows improve the kingdom ' s fiscal balance. A shift towards reliance on external, rather than internal, borrowing will lengthen average maturities on public debt and help the government contain growth in servicing costs amid rising interest rates.

The ongoing implementation of austerity measures by the Jordanian government will, coupled with sizeable foreign aid inflows, facilitate a gradual narrowing of the kingdom's fiscal balance over the coming years - from 3.2% of GDP in 2016, to 2.6% in 2017 and 2.4% by 2018. While these figures fall below government targets (-2.4% and -0.3% for the latter two years, respectively) given our expectations for social sensitivities to limit the pace of reform, they will nevertheless facilitate a gradual reduction in the public debt-to-GDP ratio from 2018 onwards. Meanwhile, the government's shift towards external, rather than domestic, borrowing will enable it to lengthen average debt maturities and consequently limit growth in debt servicing costs over the years ahead. We do not expect Amman to experience difficulties in accessing external debt, as fiscal consolidation, accelerating real GDP growth and still-strong backing from countries such as the US and the UK ensure the retention of international confidence in the economy.

Balance To Improve, But Targets Will Be Missed

Austerity Measures To Narrow Deficit
Jordan - Fiscal Position
e/f = BMI estimate/forecast. Source: BMI, national sources

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