Publication: Jordan Economic Monitor, Fall 2022 - Public Investment: Maximizing the Development Impact
Date
2023
ISSN
Published
2023
Author(s)
World Bank
Abstract
Despite a challenging global
environment, Jordan’s growth exceeded expectations during
the first half of 2022. Propelled by a strong rebound in
international tourism, the full reopening of the economy,
and improving exports, real GDP accelerated to 2.7 percent.
However, the rebound in economic activity was only modestly
reflected on labor market indicators with unemployment rates
declining only gradually. Inflation has reached its highest
level since 2018 but remains contained compared to regional
peers, due to temporary fuel subsidies and a number of other
price control measures introduced in 2022. Yet, the
untargeted subsidy support came at a fiscal cost as fiscal
consolidation adjustments have slowed down despite good tax
performance. On the external front, elevated global
commodity prices led to a significant rise in Jordan’s
import bill, outpacing the effect of the increased
merchandise exports and tourism. Moreover, capital and
financial inflows did not keep up with the widening current
account deficit, resulting in a widening of the balance of
payment deficit and a drawdown in foreign exchange reserves.
Nonetheless, due to its substantial reserve buffers, the
Central Bank’s gross foreign reserves remained at an
adequate level, while Jordan continues to retain investors’
confidence and access to foreign financial markets. Jordan’s
economic recovery in 2022 is expected to be driven by a full
rebound of the services sector, helped by the full reopening
of the economy and a strong rebound in tourism. However,
highly volatile global fuel and food prices are impacting
both domestic consumption and the trade balance. Risks
surrounding Jordan’s outlook include a looming global
economic downturn, prolongation of the global food and
energy crisis, and the impact of higher borrowing costs and
widening losses from state-owned water and electricity
sectors on debt dynamics. The Special Focus highlights the
role of public investment as a driver of growth, with a
particular focus on its recent trends, as well as its
efficiency and effectiveness. This is particularly relevant
given Jordan’s constrained fiscal envelope. Public
investment spending has been suffering from a steady decline
during the past two decades to meet the fiscal consolidation
targets, consistent under-execution, large dependency on
external aid and lack of budget for operation and
maintenance cost. Its efficiency can be maximized by having
in place financially realistic long-term strategic planning,
transparent project selection and an adoption of a
medium-term perspective. Purposefully integrating climate
concerns in public investments would also advance the
country’s achievement of its climate targets.
Citation
“World Bank. 2023. Jordan Economic Monitor, Fall 2022 - Public Investment: Maximizing the Development Impact. © Washington, DC. http://hdl.handle.net/10986/38510 License: CC BY 3.0 IGO.”