Szyrmer puts Jordan economic trends under the microscope during a roundtable organized by EPDF
- Jordan: Thursday, December 20 - 2012 at 11:05
- PRESS RELEASE
The Economic Policy Development Forum (EPDF) hosted an exciting and comprehensive roundtable on Jordan Macroeconomic Trends headed by Dr. Janusz Szyrmer, at Talal Abu-Ghazaleh Knowledge Forum.
The event was moderated by HE Dr. Mohammad Abu Hammour, former Minister of Finance who welcomed the guests and thanked HE Dr. Abu-Ghazaleh for hosting such as important event in such a crucial time.
According to the macroeconomic expert, who has over 30 years of experience in development economics, fiscal policy, statistics and econometric modeling, "Jordan's trends of output and labor force growth have been quite impressive."
"The Kingdom's GDP has been growing much faster than that of its main trading partners with advanced market economies (Europe and the USA). The numbers of highly educated Jordanians (the human capital) were growing at a higher rate than employment in the private sector," Dr. Szyrmer said.
According to Dr. Szyrmer who also served as an advisor to governments and think-tank policy advocacy/consultancy organizations of Poland, Kosovo, Ukraine, Azerbaijan, Tunisia and Jordan in addition to others believes that Jordan is suffering from multiple deficits: in current account, foreign trade, central government budget, and consolidated budget covering also governmental agencies, commissions and projects.
"Jordan tends to spend more than the country is producing. Particularly acute deficits have developed in trade with Asia and Europe, the latter has been growing in the wake of trade agreements with the European Union. An increasing current account deficit is also caused by the declining foreign factor income, falling foreign direct investments, and decreasing net private transfers (remittances)," he said.
"Sovereign debt of Jordan after an impressive decline in 2003-08 and stabilization in 2009-10, have begun growing again reaching 73% of GDP at the end of June 2012. A recent stand-by arrangement with the IMF should help the country in the short run," he explained.
Dr. Janusz Szyrmer sees that both budget domestic revenue and expenditure display an inverted "U" shape: "In 2011, Central government domestic revenue accounted for only 62% of expenditure. Foreign grants have helped reducing the deficit but were not sufficient to cover it entirely."
According to Dr. Szyrmer, two tax categories have managed to grow in the Kingdom.
"The tax on sales of goods and services and the corporate income tax (CIT). These increases have failed to compensate for the declines of two other major revenues: taxes on imports and nontax revenue," he pointed out.
He added "Tax burdens, calculated as the effective tax rates for different production factors: labor, capital, and imports have been relatively low. In particular, the very low tax burden on labor income seems to indicate that the high income earners fail to have a fair share in tax contributions. This situation reduces the budget revenue and might contribute to an increase in income inequality."
Jordan's foreign direct investment (FDI) shrunk from 24.5% of GDP in 2006 to 5% in 2011. The downward trend continued in the first half of 2012, while Jordan's poverty level has remained around 13%. The Gini coefficients, which indicate income inequality, were relatively high in the early 2000s, declined after 2003 and began growing again in 2009.
"Among short-term/medium-term reforms to be considered priority should be given to improvement in tax administration and adjustments in current education and labor employment policies," he added.
Dr. Szyrmer concluded by saying longer-term reforms should be focused on fiscal policy.
"Lowering PIT income thresholds (to achieve greater tax contributions from high income earners), gradually expanding property taxes, and reducing diverse market distortions generated by current tax exemptions and other regulatory privileges, administered/fixed prices and subsidies to energy, food and water," he stated.
Meanwhile, Dr. Ruba Jaradat, USAID Representative highlighted the work of the Forum in enriching discussions regarding the Jordanian economy which comes in line with the principles of the Agency through its ongoing work in Jordan in various fields.
Dr. Jaradat said that the economic challenges which the Kingdom is facing are difficult due to the current deficits.
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