Standard & Poor's Ratings Services said today that it affirmed its 'BB' foreign and 'BBB' local currency long-term sovereign credit ratings on the Hashemite Kingdom of Jordan. At the same time, Standard & Poor's affirmed its 'B' foreign and 'A-3' local currency short-term sovereign ratings. The Transfer and Convertibility Assessment was revised to 'BBB' from 'BBB-'. The outlook is stable.
"In the past year, the Jordanian government has managed to maintain a stable macroeconomic outlook despite some significant challenges, including high oil and food prices in the first half of the year, and a deteriorating global economic and liquidity environment," said Standard & Poor's credit analyst Luc Marchand.
The ratings on the Kingdom continue to be constrained by a high government debt burden, below-par external liquidity, and regional security concerns, which are partly offset by good economic prospects, and solid direct investment inflows and high official transfer receipts.
The central government deficit (including grants) narrowed only marginally in 2008, to an estimated 5.2% of GDP from 5.4% in 2007, mainly due to current expenditures on wages and social allocation to compensate for higher cost of living and the canceling of oil subsidies.
"The stable outlook reflects our expectation that there will be further progress with economic and fiscal reforms to face the fiscal and external economic challenges," added Mr. Marchand. Growth in GDP, forecast at more than 5% per year in the medium term, along with the good popular support, should enable the government to achieve further significant fiscal consolidation and progress with structural reforms, which are vital to making the economy more resilient in the face of external shocks.
Fiscal and external improvements that are beyond current expectations could support a positive rating action in the medium term. Conversely, any slippage in fiscal and economic reform implementation that exacerbate the country's budgetary and external imbalances could undermine the ratings on Jordan, as would significantly increased regional or political risk.
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