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Jordan credit rating down over political turmoil | ASHARQ AL-AWSAT English Archive 2005 -2017
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AMMAN, (AFP) — Moody’s and Standard & Poor’s on Tuesday expressed concern about Jordan’s economy and political turmoil, revising the outlook on its foreign and local currency to negative from stable.

Moody’s lowered the outlook on Jordan’s “Ba2” foreign currency government bond rating to negative from stable because of political turmoil in the Arab world.

It said it has also “downgraded the government’s local currency bond rating to Ba2 with a negative outlook from Baa3,” and Jordan’s local currency ceilings were downgraded to Baa1 from A3.

“Jordan does not display limited capital mobility. Nor is there evidence of a significant bias in the government’s ability or willingness to service its debt in favour of local currency,” it added.

“This rating action also reflects higher fiscal and economic downside risks,” Moody’s said.

It warned that it may downgrade Jordan’s Ba2 government ratings “if there were disruptive political turmoil that threatened a structural weakening of Jordan’s credit fundamentals relative to rating peers.”

This could include a deterioration in the balance of payments leading to a significant decline in official foreign exchange reserves or a sustained fiscal slippage that caused a jump in public debt, it said.

Meanwhile, Standard & Poor’s lowered long-term and short-term local currency ratings on Jordan to “BB+/B” from “BBB-/A-3.”

“We revised the outlook on the long-term foreign currency and local currency ratings to negative from stable. The recovery rating of ‘4’ is unchanged,” it said in a statement.

“At the same time, we left unchanged Jordan’s ‘BBB-‘ transfer and convertibility assessment.”

The two credit rating agencies said political turmoil in the region, including Jordan, were behind their decisions.

“We believe ongoing turmoil will lower Jordan’s medium-term growth prospects and damage its public finances, so we are lowering the local currency long-term and short-term ratings,” Standard & Poor’s credit analyst Luc Marchand said.

For its part, Moody’s said its announcement was triggered by its “concern that fiscal and economic downside risks related to ongoing turmoil in the region have risen following events in Tunisia and Egypt.”

Jordan’s King Abdullah II last week sacked the government and appointed a new prime minister to push through reforms to counter popular discontent inspired by Tunisia’s revolt and anti-regime protests in Egypt.

The tiny desert kingdom faces several chronic socio-economic challenges, including a high rate of unemployment, which is officially reported to be 12.5 percent.

“Moody’s notes that this is one of the higher rates in the region and similar to that of Tunisia. Poverty is also reported to be widespread and corruption is perceived to be an issue,” said the agency.

“Moreover, over the past year, consumer price inflation increased to around six percent in December.”

Standard & Poor’s said “… if the new government is able to address public grievances in a manner supportive of public finances and external investor confidence, then we believe the ratings could stabilise at the current levels.”