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Rating Action:

Moody's Affirms Jordan's B1 Rating; Outlook Remains Stable

14 Nov 2016

New York, November 14, 2016 -- Moody's Investors Service ("Moody's") has today affirmed the Kingdom of Jordan's B1 government issuer ratings and B1 senior unsecured debt rating. The stable outlook is maintained.

Moody's decision to affirm Jordan's B1 government issuer and debt ratings reflects our assessment that the country will manage to stabilize its main debt and external vulnerability indicators metrics even as overall debt remains high when compared to similarly rated peers. This view on the debt trajectory is supported by a favorable assessment of the country's institutions and their policy-making and implementation capabilities.

Jordan's country ceilings are unchanged. The foreign currency bond ceiling remains at Ba1/NP, the foreign currency deposit ceiling at B2, and the long-term local currency bond and deposit ceilings at Ba1.

A full list of affected ratings is provided towards the end of this press release.

RATINGS RATIONALE

RATIONALE FOR AFFIRMING THE RATING

Jordan's B1 rating balances the country's relatively strong economy, high debt levels, and the political and policy risk deriving from regional turmoil. The rating is supported by a debt structure that reduces rollover risk, a history of external support, and a comparatively strong institutional framework. Although domestic politics have been relatively stable, the government faces continued pressure to maintain social spending.

We forecast that Jordan's government debt, which rose to 89% of GDP in 2014 from 70% in 2011, will stabilize this year at 94% and remain at similar or even lower levels in 2017 and 2018. The country's debt remains higher than other B rated sovereigns, whose median debt will reach 52% of GDP this year. But the country benefits from significant mitigating factors including low servicing costs and significant external support (such as US government guarantees on some of its debt which lower borrowing costs, and grants from GCC nations).

Jordan's B1 rating affirmation further reflects a stable external position. Moody's external vulnerability indicator (EVI), the sum of external debt payments due and short term foreign currency deposits divided by official reserves, is meant to capture potential external liquidity constraints. Jordan's EVI remains higher than peers but has fallen to 85 this year from 151 in 2013. The fall reflects higher official reserves, which will end at over $14 billion this year compared to less than $8 billion in 2012. Lower oil prices, historically a major bottleneck for Jordan's external finances, also support an improving external position.

The B1 rating is supported by country's comparatively strong economy and institutional framework. Jordan's $39 billion economy (2016 estimate) is larger than the $21 billion B category median, and its $10,902 GDP per capita (2015, PPP basis) higher than rated peers. We expect moderate growth averaging 3% this year and next, which will support the government's efforts to stabilize debt.

Geopolitical risks, including spillover effects from conflicts in Syria and Iraq, are structural features constraining Jordan's credit rating, and are not expected to change in the next few years. Nonetheless, the country continues to show an ability to manage these shocks while maintaining domestic security under control. At the same time Jordan benefits from a solid repayment history and high rankings in the Worldwide Governance Indicators, a key component of our assessment of a country's institutional strength. Jordan's Government Effectiveness score is the third highest out of 41 sovereigns in the B category.

RATIONALE FOR STABLE OUTLOOK

The stable outlook reflects Moody's views that the government will continue pursue fiscal consolidation that should stabilize the high debt metrics over the medium term.

WHAT COULD MAKE THE RATING GO UP

Upward pressure on the rating would require a substantial reduction of current debt levels that would position Jordan's debt metrics closer to those of rating peers.

WHAT COULD MAKE THE RATING GO DOWN

Economic growth over the medium term that would be materially weaker than currently expected, leading to further build-up of debt and/or an outbreak of domestic tensions that affects Jordan's main credit metrics, including the external accounts, could lead to a negative rating action.

Outlook Actions:

..Issuer: Dev. and Inv. Proj. Fund of the Jordan Army

....Outlook, Remains Stable

..Issuer: Jordan, Government of

....Outlook, Remains Stable

Affirmations:

..Issuer: Dev. and Inv. Proj. Fund of the Jordan Army

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed B1

..Issuer: Jordan, Government of

.... Issuer Rating, Affirmed B1

....Senior Unsecured Regular Bond/Debenture, Affirmed B1

GDP per capita (PPP basis, US$): 10,902 (2015 Actual) (also known as Per Capita Income)

Real GDP growth (% change): 2.4% (2015 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): -1.6% (2015 Actual)

Gen. Gov. Financial Balance/GDP: -4.1% (2015 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -9.2% (2015 Actual) (also known as External Balance)

External debt/GDP: 70% (2015 Actual)

Level of economic development: Moderate level of economic resilience

Default history: No default events (on bonds or loans) have been recorded since 1983.

On 09 November 2016, a rating committee was called to discuss the rating of the Jordan, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have not materially changed. The issuer's institutional strength/ framework, have not materially changed. The issuer's fiscal or financial strength, including its debt profile, has not materially changed. The issuer's susceptibility to event risks has not materially changed.

The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Gabriel Torres
VP - Senior Credit Officer
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Yves Lemay
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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