S&P Upgrades Jordan to “Stable”

Standard & Poor’s (S&P) returned Jordan to a stable outlook, almost three years after lowering its ‘BB-/B’ status to negative amid economical and political regional instability.

The international rating agency expects the deterioration in the country’s fiscal and external balances to stabilize, and to then improve slightly over the medium term thanks to energy diversification plans, cheaper oil prices, and reform efforts.

“We forecast that public finances will strengthen as the state-owned power company (NEPCO) moves back toward cost recovery through 2017, and as a result of the government’s fiscal consolidation efforts. External balances will also narrow,” S&P said in its report. “This trend will be supported by lower energy imports as well as lower oil prices and high current transfers stemming from official grants and private remittances”.

However, the agency said that ratings on Jordan remained affected by high government and external debt burdens, which have grown as a result of regional shocks in the aftermath of the Arab Spring, making the country highly reliant on external lending. “The unstable geopolitical environment, which has led to an influx of refugees, is straining public resources and complicating the Kingdom’s ability to implement difficult structural reforms that would allow Jordan to graduate from international support and help it to regain unrestricted market access,” the agency said.

S&P predicts a moderate increase in GDP growth to 4.5 per cent by 2017, prompted by higher public investment, GCC grants, and consumption growth. But it doesn’t expect any major economic reforms to be carried out in the near future. “Despite the implementation of the three-year IMF standby arrangement, and the recent adoption of legislation to improve the business environment, including a new public-private partnership law and an investment law, we still see limited prospects for difficult and politically sensitive economic reforms in Jordan.”