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French Version

Jordan must create thousands of jobs to avoid poverty trap

Economic Survey stresses necessity of continuing growth trends

Jordan needs to achieve seven percent annual growth for several years to avoid the trap of marginalization and poverty, a new economic survey warned. Jordan's economy has enjoyed reasonably robust growth following the upheavel of the US led invasion of Iraq two years ago which saw Jordanian exports to its neighbour slump.

Much of Jordan's current expansion is attributable its growing manufacturing sector which has also been boosted by the U.S.-Jordan Free Trade Area agreement signed in 2001.

But the report warns that despite its bullish growth Jordan's economy must continue to expand at its current rate of around seven percent in order to create enough jobs to offset the country's fast expanding working population.

In its annual report on the Jordanian economy for 2004, Lebanon-based Banque Audi underlined the need for the country to create more jobs.

"What is needed is the creation of thousands of jobs a year to reduce unemployment from its critical high level, within the context of a rapidly growing labor force and a rising participation rate," the report said.

In this respect, enhancement of trade and private investment could help generate much needed employment opportunities. The drop in unemployment from 13.5 percent in June 2003 to 12.5 percent in June 2004 is an encouraging development in that direction, the report said.

It added that as social and economic issues are strongly linked, their solution requires a realistic, coherent and comprehensive vision from all concerned authorities. Additional measures in the realms of fiscal, financial and social policies are especially needed.

"Today's improving economic conditions might be relatively more favorable to policy-makers for structural adjustment efforts aimed at fundamentally bridging the gap between the current socio-economic conditions and the desired and acceptable level of economic and social welfare," the Banque Audi report said.

Audi said there are signs of a strong pick-up in the Jordanian economy and sectors of activity.
Growth observed since the beginning of 2004 follows the mild performance of last year.

"The main issue is that this year's growth was realized within the context of a contraction in government spending, suggesting that output growth should have been driven by the private side of aggregate demand."

Banque Audi said the Jordanian economy performed exceptionally well in the first half of 2004. Output growth was recorded at its highest level in more than a decade, with real GDP growth registering at 7.2 percent against 2.8 percent over last year's corresponding period.

The report said it is critical to note growth emanated from a weak first-half-of-2003 base adversely affected by the Iraqi war spillovers and rising regional uncertainties. Based on the first-half performance, it is estimated that growth could end the year within the 5 to 6 percent bracket, which is regarded as healthy performance in the context of excess economic capacity and important growth reserves.

"The real sector witnessed a very strong recovery over the first half [of the year], supported by a surge in exports, a pick-up in domestic demand, a dynamic tourist season and renewed confidence."

The breakdown of the 7.2 percent growth over the different economic sectors shows that manufacturing accounted for a strong 2.2 percent share, followed by transport and telecommunication with 2 percent, construction with 0.9 percent; trade, hotels and restaurants with 0.6 percent, energy with 0.4 percent and financial and real estate services with a 0.3 percent contribution. All other remaining sectors had a net share contribution of 0.6 percent.

The analysis of major real sector indicators similarly backs strong activity pick-up in the first half of 2004. Indicators have reported strong upward movements, though at varying rates. Some of the sectors that witnessed high or significant growth include: imports with 37.1 percent year-on-year growth; exports with 33.1 percent; cement production with 20 percent; construction areas with 34.8 percent; and merchandise at the port with 28.8 percent. Other indicators include tourist receipts with 18.1 percent and power consumption with 17.9 percent.

"While the contribution of each of those indicators to output growth remains confined, it is the concurrent aggregation of incremental value added to the different performance indicators that was behind the reported improvement in growth," Banque Audi said.

Amman,04 04 2005
Osama Habib
The Daily Star
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