S&P affirms Jordan's stable outlook on donor support and growth prospects
Despite external pressures, Jordan continues with fiscal consolidation and trying to reduce losses at state-owned companies
S&P Global Ratings affirmed Jordan’s foreign and local currency sovereign ratings on expectations that a strong investment pipeline supported by international donors and rising exports will help boost growth.
The agency confirmed a stable outlook with B+/B rating. It also maintained its B+ long-term foreign currency issue rating on the sovereign-guaranteed bond for Jordan's armed forces.
“The stable outlook balances our expectation that over the next 12 months, donor funding will continue to support the government's financing needs and keep debt-servicing costs low, against the risk that the government will significantly increase spending to alleviate social and economic challenges,” S&P said.
Jordan’s ratings could be lowered if external funding sources were strained and debt accumulation by the central government and/or state-owned enterprises rose, the agency said.
Jordan, one of the politically stable countries in the Middle East, has struggled with the debt levels amid a sharp rise in its population due to an influx of refugees from Syria. Jordan's ratings are constrained by its high public debt and the economy's large external financing needs, which are driven by sizeable current account deficits. Ongoing pressures from regional conflicts have also slowed its growth trajectory.
Despite external pressures, Jordan continues its fiscal consolidation efforts and is reducing losses at some state-owned companies, S&P said in the report.
“We project that government debt will gradually decrease over the forecast horizon through 2022. We expect that further international assistance, particularly from the US and the GCC, would be forthcoming if needed,” it said.
“We forecast that economic growth will gradually improve to 3.5 per cent by 2022, supported by public and private investment and growth in exports.”
The UAE, Kuwait and Saudi Arabia in June last year extended a $2.5 billion aid package to Jordan to help stabilise its economy amid record debt levels and unemployment. The package from the Arabian Gulf allies includes a deposit to the central bank, annual budget support for five years and a combined $600 million in credit guarantees to help the country secure World Bank financing for infrastructure projects and other development initiatives.
“We anticipate that the government will raise more external debt, primarily on a concessional basis, over 2019-2022 to meet its funding needs and as an attempt to lengthen its debt maturity profile,” S&P said. “As a result, we expect debt-servicing costs to remain under 10 per cent of total revenues over 2019-2022.”
Updated: March 18, 2019 02:15 AM