Jordan growth to accelerate next year on a low price of oil

The plunge of the Brent crude oil price to below $70 a barrel from around $115 over the past six months is a major boon for Jordan.

Jordan which normally imports all its oil needs from the GCC is now expecting some economic growth to accelerate to as much as 4% next year.  Cheaper oil cuts down the country’s current account deficit, the deputy central bank governor Maher Hasan was reported as saying this Wednesday

He also noted that the current account gap that is set to fall below 8% of gross domestic product this year from nearly 10% in 2013.  Cheaper oil will in addition to cutting costs generally will also strengthen the government’s fiscal position by reducing state fuel subsidies and losses at the state electricity company.  It could well mean that in the medium term, have a negative effect if it reduces remittances from Jordanians workers out of the Gulf oil exporting countries as well as possibly dampens direct investment by those Gulf companies, he said.

The impact for now, however, is clearly positive.  Hasan estimated this year’s economic growth could be up to approximately 3%, up from around 2.8% of last year.

“We are planning on growth continuing apace through 2015 with our expectations for a growth rate somewhere between 3.5 and 4%,” he told Reuters on the side-lines of a financial conference.

“We think the strong external demand seen in 2014 will continue, the pick-up in economic activity will continue and also the decline in oil prices will help the economy.  A decline in oil prices will reduce our import bill, leave more money to spend with the public domestically.  The government capex spend is projected to remain strong in 2015 and private sector investment also.”

Hasan spoke also about the inflation that is for 2014 close to 3%, to fall to between 1.5 and 2% next year, “largely due to the decline in oil and commodities prices and because there is no domestic pressure to push prices up significantly in the economy.”