As far as the economist, as well as the average man in the street, is concerned, the economy may recover and the standard of living may rise by pursuing one of two approaches.
The first approach aims at achieving immediate prosperity by increasing outlays of public expenditure, which can be financed by borrowing funds externally — if such financing is at all available — or by overdrawing with the Central Bank, in other words, printing more money.
In both cases the improvement is temporary. It ends up with a crushing financial crisis when the bubble sooner (rather than later) bursts, and time comes to pay a heavy price for imprudent and shortsighted policies. We witnessed something of the sort during the decade from the mid-seventies to the mid-eighties. We are still paying the price in the form of heavy debt, being obliged to adopt a harsh economic adjustment program, and undergo painful reforms and restructuring measures.
The second approach to improve the economy starts with reforming the macroeconomic, removing distortions, including the reduction of deficit in the budget and in the balance of payments, bringing inflation under control, building up the official reserve of foreign exchange with the Central Bank, reducing debt, scaling down bureaucracy, and improving the general climate of investment.
A quarter of a century ago, Jordan opted for the first approach, which gives immediate results but is prone to setbacks. It took the second approach of structural reform and self-dependency in the nineties. The process of economic reform is about to be completed. What remains is the continuity of reducing deficits in the budget, and the accomplishment of certain structural and institutional reforms.
The economic reforms undertaken during the nineties were successful in reorganizing the internal economy and preparing it for a `take off', which is sustainable and self-generating. However, there are other external factors which are favorable and can help in accelerating the economic recovery, the most important of which is the sharp rise in petroleum prices, which will improve and reactivate the economies of the Gulf states with a direct spillover to the economic situation in Jordan itself, especially when it comes to enhancing exports and reducing unemployment.
On the other hand, Jordan is receiving generous technical and financial foreign aid, and is expecting an imminent lifting of the economic sanctions imposed on Iraq since 1990. Other possible favorable factors are: easy access to the Palestinian market, more economic and trade openness in neighboring Syria, the success of the privatization program, the reduction of the population growth rate, the European partnership, and the free trade arrangement with the US.
Successive governments were always under political and popular pressure to improve the economic situation quickly.
They were, therefore, tempted to go to the easy and quick methods. However, it is fortunate that the economic adjustment reform has continued uninterrupted for the eleven years, because it is backed by a strong political will at the highest level.
Internally, the economic base is well and ready to take off. Externally most factors are favorable or promising. It is, therefore, quite reasonable to be optimistic that the current slowdown of economic activity in Jordan is about to end, giving way to a sound recovery and healthy growth. We may not have to wait for long. ― ( Jordan Times )
Fahed Al Fanek
© 2000 Mena Report (www.menareport.com)
