(MENAFN- Jordan Times) Specific circumstances made the Jordanian economy enjoy certain features that may not be seen, as far as I know, in the economy of any other nation.
With the exception of Jordan, there is no country where the volume of aggregate consumption exceeds its entire gross domestic product; this cannot ensure sustainable domestic savings.
Such special circumstances are due to the extensive financial inflows in the form of expatriate remittances, which finance part of families' consumption, and foreign grants, which finance part of the government consumption.
Private consumption in Jordan is estimated at around 82.4 per cent of the GDP, while public consumption stands at around 20.2 per cent of the GDP. That brings the total consumption to 102.6 per cent of GDP, leaving a negative domestic saving of 2.6 per cent of the GDP.
Despite the fact that Jordan's domestic savings are negative, there were private sector investments, in the value close to 19.1 per cent of the GDP, and government investments reaching 4.8 per cent of the GDP. Thus, the total value of investments in 2011, for example, reached 23.9 per cent of the GDP. The combined total consumption and total investment would thus reach 126.5 per cent of the GDP, a case not seen anywhere else in the world.
In the absence of domestic savings, the sources of these extensive investments are the private sector, making up 15.8 per cent of the GDP, reduced by 1.3 per cent of the GDP, which represents the negative national savings of the public sector. Thus, the net savings of the country would be 14.5 per cent of the GDP. The remaining balance of 9.4 per cent of GDP comes from the net flow of foreign investment.
The above-mentioned numbers and percentages sum up the big structural picture of the Jordanian economy and reveal the following:
- Jordan is a country opened to the outside world; its economy is globalised and it must stay so if it does not wish to see the national economy shrink by around 25 per cent.
- The net contribution of the Jordanian public sector is negative. It lives on borrowings from the private sector.
- The size of the public sector is too large in relative terms. It exceeds the capacity of the Jordanian economy and forms a heavy burden on the country's resources.
- The GDP is not suitable to be used as a benchmark to measure the economic indicators of the Jordanian economy. Attention needs to be shifted to the gross national product, which is more indicative of the structure of the Jordanian economy.
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