Samir Rifai's government is confronted with a bunch of heavy economic challenges it has to tackle in the new year. Such challenges compel the government to formulate a special agenda and a set of policies in order to realise multiple objectives. Part of those objectives are of aggressive while others are of defensive nature. Maintaining the status quo is not an option. The prime minister is reputed to be an activist. He did not come to run the day-to-day business of the government; he came to make a difference.
One aggressive objective is to raise the economic growth rate. Another is to secure the advancement of the large-scale projects. Defensive objectives include reducing the budget deficit, maintaining the public debt below 60 per cent of the gross domestic product and keeping inflation under control.
The targeted rate of economic growth in 2010 will not be impressive by historical standards; Jordan is still struggling in an environment of severe world economic and financial crisis and its far-reaching consequences.
Achieving a growth rate of 4 per cent in 2010 is not easy but it can be done. It calls for graduating from the slowdown trend of growth rates in 2007, to enter a new stage of accelerating quarterly growth rates. Government performance will be judged as satisfactory if the growth rate in the first quarter of 2010 hovers above 2.5 per cent, gaining one percentage point in every following quarter, to reach 5.5 per cent in the fourth quarter of the year, thus making the targeted average growth rate for this year 4 per cent.
Large-scale projects currently under discussion are plenty. They include: oil shale, uranium mining, nuclear reactors, Red-Dead Canal, a cross-country railway project as part of a regional and international network, and the modernisation of the Jordan Petroleum Refinery Company. All these and other mega-projects create a large-scale demand on funds that exceed Jordan's capacity. The government, therefore, must be extremely cautious and take only well-calculated risks. Remember, money can be spent only after getting it.
The two related problems of budget deficit and public debt call for a strong political willpower and tough decisions. It is not easy to abide by the limits of the tight 2010 budget, drafted by the previous government, but it is worth trying. If the government is able to prevent the deficit from rising above the level specified by the budget, it will be considered as a successful achievement worth praising. The government can do that either by obtaining Arab aid, which dried up in 2009, and/or by writing off some categories of expenditures that we can do without.
A measure of inflation in 2010 is inevitable. The economic recession in 2009 caused inflation to go down to near zero, but the expected economic recovery in 2010 will definitely cause a rise in inflation. In this respect, the Central Bank has at its disposal a wide margin of movement to fight inflation as soon as its indicator gives the warning signal. The acceptable inflation rate in 2010 is anything below 4 per cent as an average for the whole year.
The government is not expected to make miracles. The expectations are not very high, but observers have the right to see defined practical objectives and government commitment to achieving them. Such commitments would serve to evaluate and measure the government's economic performance in 2010.
By Fahed Fanek
© Jordan Times 2010
