Moody’s maintains Jordan’s stable outlook despite Covid-19 challenges

Amman has been undertaking economic reforms to boost growth

The Amman skyline. Moody’s Investors Service affirmed a “B1’ issuer rating on Jordan and maintained a stable outlook. Courtesy: Four Seasons Hotel Amman

Moody’s Investors Service affirmed a B1 issuer rating on Jordan and maintained a stable outlook, despite elevated challenges to the economy due to the coronavirus pandemic.

“The decision to affirm the ratings takes into account credit supports such as the government's sustained commitment to economic reforms and to medium-term fiscal consolidation, namely in the context of the new IMF programme,” Moody’s said on Thursday.

The ratings also “reflect the broad-based international commitment to support Jordan's economic, financial and social stability agenda through budgetary grants and concessional lending.”

Jordan has been undertaking various measures to boost growth as part of the five-year "Reform Matrix" programme that began last year. The country is focusing on reducing the cost of doing business, strengthening governance and regulatory profitability as well as increasing labour market flexibility. It is also aiming to enhance the overall competitiveness and efficiency of the country’s private sector.

“Nearly half of all 256 regulatory and legislative reforms planned under the Reform Matrix have already been implemented and Jordan's progress has been captured by its large jump in the World Bank's 2019 Doing Business Report to 75th from 104th place (out of 190 countries) with the prospect of stronger growth trend, enabled by these reforms, supporting medium-term fiscal consolidation,” the ratings agency said.

The government is also implementing the International Monetary Fund backed programme to support the economy.

The new four-year arrangement under the IMF's Extended Fund Facility, which was signed in late March 2020 at the expiration of the previous programme, "provides an effective policy anchor that will support the government's implementation of structural reforms and the fiscal adjustment planned for the next four years."

The programme is expected to stabilise the government's debt-to-GDP ratio in the next couple of years and reduce it below 80 per cent of GDP by 2024-25 “through a combination of expenditure control, improvements in tax administration and tackling of tax evasion and tax avoidance, and through enhancing the efficiency of public spending.”

Jordan will also continue to benefit from strong and broad-based international donor support in the coming years including budgetary grants as well as bilateral and multilateral concessional lending, Moody’s said.

The country's economy is expected to contract by around 3 per cent in 2020 due to various challenges including the Covid-19 pandemic as well as subdued growth of only 2 per cent from 2015 to 2019 period.