Ammon News - AMMONNEWS - Jordan's economy is resilient despite regional tensions in Syria and Iraq and violence in Gaza, with growth of over 3 percent projected this year, the International Monetary Fund said.

In a statement at the end of a review of Jordan's economic performance under a $2 billion standby arrangement signed at the end of 2012, the head of the IMF mission Kristina Kostial said Jordan's economy had proved resilient "in an increasingly difficult regional environment".

The IMF on Sunday said growth was expected to reach 3.3 percent this year, up from 2.8 percent last year, helped by recovery in several sectors, including mining and agriculture.

Inflation was expected to decline to less than 3 percent by the end of 2014 from 3.3 percent in 2013, the IMF said.

Kostial said the kingdom's performance under a 3-year standby deal concluded in August 2012 was broadly on track.

The cash-strapped kingdom was forced to sign the IMF deal to get much-needed finances to set it on the right track and stave off a major economic crisis, officials say.

Jordanian officials say they have also been hard hit by the cost of accommodating 600,000 registered Syrian refugees fleeing the civil war, who have added to the strain on an aid-dependent economy already burdened with over 20 billion dinars ($28 billion) in public debt.

Investment sentiment has also been hit by the spillover effect of regional unrest, with the conflict in Gaza and Iraq acting as a dampening effect on tourism and business.

Businessmen and investors, however, say foreign aid that has amounted to several billions of dollars by major Western donors to mitigate the humanitarian impact of the Syrian crisis has cushioned the economy.
They also say an influx of skilled Syrian labour and a housing boom along the border with Syria sparked by refugees has been a boon for the economy.

Jordan has also benefited from an influx of wealthy Iraqis who have fled violence in Iraq in recent months, helping to inject millions of dollars in the economy, and in particular the real estate sector.

Independent economist Rasha Abdullah Dayyat said the government had no choice but to continue with IMF-guided reforms if it was to attain the growth targets needed to get the economy back on track and to reduce a chronic budget deficit.

"They have no choice and they have been so far adept in meeting the conditions laid down. The economy has also adapted well to the challenges," Dayyat added.

The kingdom had been on the brink of a major fiscal crisis in 2012 - with a spiraling budget deficit that was almost 11 percent of GDP - after street protests pushed the authorities during a wave of regional unrest to raise public salaries and maintain hefty subsidies to keep social peace.

Officials say the controversial IMF deal commits Jordan to keep raising electricity prices, which consume hundreds of millions of dollars of its subsidy budget.

Under the IMF deal, the government is expected to raise electricity prices again in early 2015 under a plan to reduce losses of a state-owned electricity firm that officials say alone accounts for about 15 percent of GDP.

The IMF also said it appeared that the country's energy bill was so far under control despite 4 billion dinars of accumulated debts since 2011 that have been partially offset by foreign aid.

"Owing to shortfalls in gas supply from Egypt, the electricity company incurred additional losses which will be financed mostly from grants," said the IMF's Kostial.

Jordan, which imports 97 percent of its energy, has seen costs spiral in the last few years after supplies of cheap Egyptian gas were disrupted. The disruptions have left Jordan dependent on imports of costly diesel and fuel oil.

*Reuters