Sunday, November 7, 2010

IMF Economic Forecast For 2011

By Fahed Fanek
This comment was published in Jordan Times on 8/11/2010

In a recent report, the International Monetary Fund revealed its latest projections for the economies of both exporting and importing countries in the Middle East and North Africa.

These projections were on the bright side. They indicated that the coming year will witness reasonable growth rates in almost all the countries of the region

The IMF forecast for Jordan is that economic growth is expected to be 4.2 per cent, inflation 5 per cent, and the unemployment rate to be around 12 per cent.

These forecasts did not take Jordanian analysts by surprise. The fund did not expect surprises, substantial changes or large-scale developments. At least it did not take such possibilities into account in its projections.

IMF projections are usually built on the assumption of continuation. The future, the fund believes, is an extension of the present. The IMF does not take into consideration the fact that the Middle East region, in particular, is prone to surprises and that uncertainty is the name of the game here.

One cannot predict what will happen in Iran, Iraq, Lebanon, Sudan, Yemen or Palestine, even though events in these countries have a major impact on the economic situation.

As far as Jordan is concerned, the IMF predicted that 2011 will be more of the same, and that the economic indicators will remain the same, with slight improvement.

The IMF predications raised Jordan’s economic growth rate by less than one percentage point, maintained inflation at the current rate of 5 per cent, and reduced the annual average of unemployment by one percentage point - nothing spectacular.

This way, the benefits of the IMF predictions are very limited; they say nothing new that general observers do not know. The IMF predictions will not create shockwaves, shake stagnant water, or change much of Jordan’s economic outlook. They do not alter the mood in the business circles.

The question one needs to ask is whether the government is satisfied with these slight gains the IMF report was kind enough to bestow on Jordan’s economic performance in 2011.

The Ministerial Economic Team needs to tell us why the economic growth rate cannot exceed 5 per cent, inflation cannot be stabilised at 4 per cent or less, and the rate of unemployment cannot be reduced to a single digit.

If it is true that the overall world economic growth rate will reach 4.5 per cent in 2011, why should Jordan be content with a growth rate lower than that of the world, including poor and developing countries as well as rich and developed countries with slow growth rates?

To be at the level of the world growth rate is a static state of affairs. This should not be acceptable to an ambitious and dynamic country that seeks to compete and rise faster than the world at large in order to catch up with the advanced countries.

One should not forget that the per capita income in Jordan does not exceed one tenth of the per capita income in many advanced countries.

So far, the government did not say anything about its own projections or objectives for economic growth in 2011. Perhaps it is saving its point of view to be used with the coming draft budget. It is hoped that its projections will be more ambitious and much better than the projections of the IMF, which does not expect a strong rebound after two years of economic slowdown.

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