Moody's downgrades Jordan citing the rise in political tensions

Moody's changes outlook on Jordan Ba2 foreign currency government bond rating to negative from stable. The rating agency has today also downgraded the government's local currency bond rating to Ba2 with a negative outlook from Baa3. Jordan's local currency ceilings were downgraded to Baa1 from A3.

Apparently, the turmoil in Egypt is not lost on Jordan. The riots there continue, although to a lesser extent than Egypt. The Jordanian government was sacked, but the Monarchy continues. Moody's believes that rising political event risk has led to a moderate deterioration in the operating environment for businesses based in Jordan. Via Moody's:
Moody's decision to change the outlook on Jordan's sovereign ratings to negative from stable was triggered by the recent rise in domestic political tensions. There have been a number of anti-government protests in Jordan in recent weeks -- although not on a comparable scale to those in Tunisia or Egypt. Demonstrators have been demanding political reform and an improvement to poor living standards. King Abdullah's recent dismissal of the government and promise to accelerate reform was a reaction to these escalating political pressures.

Jordan suffers from a number of chronic socio-economic challenges, including a high rate of unemployment, which is officially reported to be 12.5%. 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. Moreover, over the past year, consumer price inflation has increased to around 6% in December.

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