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15-05-23

Fitch Ratings Affirms Jordan's Long-Term Foreign-Currency Issuer Default Rating at "BB-" with Stable Outlook

(MENAFN) Fitch Ratings has affirmed Jordan's long-term foreign-currency issuer default rating at "BB-" with a stable outlook. This is due to the country's macroeconomic stability, progress in reforms, and resilience in the banking sector, along with a buoyant public pension fund. Despite this positive outlook, the ratings are constrained by high government debt, weak growth, domestic and regional political risks, a sizable current account deficit, and net external debt higher than rating peers.

The rating agency estimated that Jordan's general government budget deficit declined to 2.7 percent of the gross domestic product in 2022, below its 3.8 percent forecast made in August. This was due to continued growth in tax collection combined with expenditure restraint and reprioritization to accommodate temporary fuel subsidies phased out at the end of 2022. Fitch forecasts fiscal consolidation to gradually continue, with the deficit declining to 2.3 percent and 1.9 percent in 2023-2024. However, the sustainability of the current fiscal strategy will depend on ongoing reforms aimed at lifting growth prospects and generating employment. Fiscal space is limited, given the high level of debt and a rigid expenditure profile.

The stable outlook for Jordan's long-term foreign-currency issuer default rating reflects Fitch's expectation that the country's external finances will remain stable, despite the challenges posed by the Covid-19 pandemic and geopolitical tensions in the region. The country's banking sector has shown resilience, with high capital buffers and a low level of non-performing loans. The buoyant public pension fund also provides a buffer against external shocks.

However, the ratings agency notes that Jordan's high government debt, weak growth, and political risks continue to weigh on the country's credit profile. The country's current account deficit remains sizable, reflecting structural factors such as a reliance on energy imports and a lack of export diversification. Net external debt is also higher than rating peers, reflecting the country's external financing needs.

In conclusion, while Jordan has made progress in reforms and shown resilience in the face of challenges, the country's credit profile remains constrained by high government debt, weak growth, and political risks. Fiscal consolidation will be key to maintaining macroeconomic stability, but this will require ongoing reforms to lift growth prospects and generate employment. The stable outlook for Jordan's long-term foreign-currency issuer default rating reflects Fitch's expectation that the country's external finances will remain stable, despite the challenges posed by the Covid-19 pandemic and geopolitical tensions in the region.

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