Jordan Central Bank Says Too Early to Predict Impact of Coronavirus on GDP

A laborer sprays disinfectant in Jordan's archaeological city of Petra south of the capital Amman on March 17, 2020, to prevent the spread of COVID-19. ( AFP)

Jordan’s central bank governor, Ziad Fariz, said on Monday it was too early to predict the extent of the negative impact on the cash-strapped economy from a nearly month-long lockdown to stem the coronavirus outbreak.

“The forecasts of growth are premature. It’s difficult to predict the negative impact on the growth rate,” Fariz told Jordan’s Al Mamlaka television news channel. He also added; however, that the crisis resulted in a sharp drop in demand and production. He noted the once-thriving tourism sector would require at a least a year to recover.

The IMF last month approved a four-year $1.3bn program with the kingdom. It expected Jordan’s economy to grow around 2.1% in 2020 but gradually rise in the next few years to 3.3%.

Officials are worried that the effect of the crisis on tourism, which generates around $5bn annually, will slash growth projections. It will also deepen an economic downturn and a slowdown in domestic consumption that was evident even before the outbreak.

“For nearly a month now the Jordanian economy has nearly stopped,” Fariz said.

Drastic measures

The country has been quicker than most in the region to take drastic measures to stem the spread of the virus by imposing a tight lockdown that has brought large sectors of the economy to a standstill.

Jordan stopped all international flights and closed all border crossings for passenger travel with Syria, Iraq, Israel and Saudi Arabia. It also imposed a curfew under draconian emergency laws.

Jordan has 349 cases and six deaths but the authorities fear the virus could spread quickly.

The central bank took a series of measures last month to mitigate the impact by reducing interest rates. It will also cut compulsory reserves for commercial banks to inject more than JOD500mn ($705mn) of extra liquidity.

It also prodded banks to extend another JOD500mn at interest rates that do not exceed 2% to help firms that have been hurt by closures.

A main concern was keeping industry and small businesses from faltering, Fariz said. He also added a resilient banking sector with over JOD30bn in deposits underpinned the country’s monetary stability.

The government said it was considering reopening some closed industries and small businesses closed to ease the impact on the economy.

Fariz said the kingdom which imports all its energy needs could benefit from a steep drop in oil prices as the coronavirus pandemic pummels demand.

“The reduction in oil prices reduces the burden on the economy.”