Driving Inflation Down

The Jordanian citizen today is preoccupied with the increased price levels of goods and services or the high cost of living, which is scientifically known as inflation and that is the file we’re discussing on today’s episode.

Inflation is the steady increase in price levels or the cost of living. In Jordan, the price levels of goods and services witnessed a significant increase since the global economic crisis that erupted in 2008 and is still ongoing until this day. What are the reasons behind these high inflation rates in Jordan during the previous years?

Mazen Marji: Of course when we talk about inflation we’re talking about a significant increase in price levels that didn’t happen instantly, but resulted from accumulations throughout the years, we can specially refer to 2008 when the global economic crisis erupted. But in 2017, Al-Mulki’s government started a series of measures led by an increase in sales tax on 93 basic goods, basically food and beverages. Therefore, these goods in addition to the increase in electricity prices, then one year prior to that was the increase on social security installments. Eventually, all of these decisions contributed to the inflation process and the living-cost increase and so on. In addition to that there are monthly increase of price levels, which the government claims is keeping up with increases of oil price levels, which is completely incorrect because when oil price levels increased by 5%, for example, the government would raise by 7 or 8% so there is an accumulation over the years. When oil prices were 147, we paid for a gasoline tank like we paid today or less. We used to pay for 95-octane gasoline around JOD 14.50, now we pay JOD 14.60 since the beginning of 2018. This directly was reflected on Jordanian economy through the increase in costs, import values, the decline in external investment and exports to some markets which we succeeded in entering.

Inflation is perceived in major economies around the world as an economic problem caused by the growth or increased aggregate demand which is basically caused by consumer spending levels due to the rotation of the production process and increase of wage and salary rates, this is solved through the Central Bank. In Jordan, the increase in price levels did not happen after the increase in aggregate demand. What does our guest Mazen Marji tell us about income rates in Jordan and its association with inflation and price levels increase of goods and services?

Mazen Marji: The income level cannot perform any more like it used to before, meaning purchase power. The purchase power of the Jordanian Dinar became less and the purchase power of the salary as well. In a sense, if you are paid 100, 200, 400 or 500, now this amount of money is not capable of offering you the same goods, food value, power value and the value of services you need, weather and transportation or telecommunication in the same level before this inflation happened.

It is important after discussing an issue to try and come up with solutions, and this is what we promised to do in Al-Mo’asher since day one, driven by our social responsibility. What are the available solutions today for decision-makers to control inflation?

Mazen Marji: Of course during the past years, my colleagues and other people offered many solutions. Perhaps during my talk I mentioned taking advantage of the trade agreement to increase exports and about the increase in economic activity related to marketing Jordan and promoting Jordan in order to attract Investments as now these Arabic, local and foreign investments are decreasing.

We are expecting in 2018 an increase in price levels, as indicated in the General Budget of 2018 the raise will include tax prices of several good and services which threatens more inflation. What is required here is paying more attention to this problem, especially in the light of the highest unemployment rates in 25 years.