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Sun 18 Jul 2010 01:30 PM

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IMF forecasts 3.5% economic growth for Jordan in 2010

GDP set for stronger growth in 2011 as the economy recovers from the downturn.

The International Monetary Fund (IMF) forecasts Jordan's economic growth at 3.5 percent this year but rising in 2011 as its economy recovers from the impact of the global downturn, an IMF official said.

"We can see it in the orbit of 3.5 percent, something like that," Paul Cashin, head of the IMF mission to Jordan, told reporters on Saturday after meeting Finance Minister Mohammad Abu Hammour.

The economy expanded 2.3 percent in 2009 as a whole, slowing from 7.8 percent growth in 2008 and its weakest performance since an economic crisis in 1989 when the country was forced to seek help from the IMF.

The government and the IMF had in December forecast around 4 percent growth in 2010 on the back of stronger capital inflows and private investments.

Jordan's Finance Minister Mohammad Abu Hammour said a higher growth forecast for 2010 compared with last year illustrated the economy was on the path of recovery despite a regional outlook that still weighed on the kingdom.

The kingdom has close business and economic ties to Gulf Arab governments which have been hard hit by a drop in oil prices.

"Jordan as we all know is a very open economy and has been subject to quite a deal of shocks, particularly those emanating from the Gulf Cooperation Council (GCC), which had their growth slow down, and that's definitely affected the path of growth here in Jordan," Cashin said.

"It's more Jordan's trading partners just pure and simply growing slower, it's taking longer for them to accelerate growth," Cashin added.

Last year the aid-dependent country ran up a record budget deficit of 1.45 billion dinars ($2 bln) or 9 percent of GDP, much bigger than expected, as public finances came under strain after the global downturn hurt domestic demand and foreign cash flows, including remittances from expatriates in the Gulf.

It has announced budget cuts of $1.4 billion this year, aiming to slash the deficit to 6.3 percent of GDP.

While Jordan's economy has weathered the global economic downturn better than most Western economies, domestic demand and remittances from abroad have been hit.

Economists say although economic growth in Jordan should accelerate this year, uncertainties remain due to a continuing decline in foreign aid and weak domestic demand.

The IMF official said Jordan's prospects were in many ways tied to the region's fortunes.

"We are expecting growth to be rising in the near and medium term, so in a sense the current sort of below-average growth is not really idiosyncratic to Jordan, its affecting many countries in the region and certainly many emerging market countries," Cashin added.

GDP rose to 9.61 billion dinars ($13.5 billion) in 2009 from 9.35 billion in 2008. (Writing by Suleiman al-Khalidi; Editing by David Holmes) ($1 = 0.709 dinar)