Industrial production jumps as eurozone economy powers on

Overall in 2017, eurozone GDP rose 2.5 percent, Eurostat said, the fastest growth rate since a 3.0 percent rise in 2007. (Reuters)
Updated 14 February 2018
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Industrial production jumps as eurozone economy powers on

BRUSSELS: Eurozone industrial production jumped more than expected in December, data from the EU statistics office Eurostat showed on Wednesday, underlining the fastest economic growth rate in a decade that economists expect to continue in 2018.
Eurostat said industrial production in the 19 countries sharing the euro rose 0.4 percent month-on-month for a 5.2 percent year-on-year gain. Economists polled by Reuters had expected a 0.2 percent monthly and 4.2 percent annual rise.
“The acceleration of production growth is unlikely to be a one-off as the outlook for industry remains rosy,” said Bert Colijn, senior eurozone economist at ING bank.
“Given the current backlog of work in industry, it is no surprise that hiring and investment in capital goods are high on the list of businesses. This adds to the strong economic picture for the start of 2018,” he said.
The statistics office also confirmed its earlier preliminary estimate of gross domestic product growth in the eurozone in the last three months of 2017 at 0.6 percent quarter-on-quarter and 2.7 percent against the same period of 2016.
Overall in 2017, eurozone GDP rose 2.5 percent, Eurostat said, the fastest growth rate since a 3.0 percent rise in 2007.
“Looking ahead, surveys suggest that the region’s upturn will gather pace,” said Stephen Brown, European economist at Capital Economics. “We expect the eurozone’s upturn to match last year’s strong pace in 2018, with annual GDP growth of 2.5 percent.”
The GDP of Germany, the eurozone’s biggest economy, grew 0.6 percent on the quarter and 2.9 percent year-on-year in the fourth quarter, with France at 0.6 percent and 2.4 percent respectively and Spain at 0.7 and 3.1 percent respectively.
“For the year 2018 as a whole, a strong increase of 2.5 percent is still likely, even if the statisticians have slightly revised previous data downwards,” Joerg Kraemer, chief economist at Commerzbank, said in a note on Germany.
“We continue to believe that the upswing could continue for another two or three years despite the roll-back of labor market reforms because cyclical tensions on the labor market are not yet in sight,” he said.
Eurostat also revised upwards November production figures to 1.3 percent month-on-month from 1.0 percent and to 3.7 percent year-on-year from 3.2 percent.
The production surge was fueled by durable consumer goods such as refrigerators and TV sets, the output of which jumped 2.7 percent on the month in December and was 7.4 percent higher than a year earlier.
The output of intermediate goods — like parts for their production — jumped 1.4 percent for a 6.6 percent annual gain.
The production of capital goods rose 7.6 percent year-on-year in December, accelerating from 6.7 percent in the previous month, indicating that investment was picking up too.


Jordanian cabinet approves new IMF-guided tax law to boost finances

Updated 21 May 2018
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Jordanian cabinet approves new IMF-guided tax law to boost finances

AMMAN: Jordan’s cabinet on Monday approved major IMF-guided proposals that aim to double the income tax base, as a key part of reforms to boost the finances of a debt-burdened economy hit by regional conflict.
“When only 4 percent of Jordanians pay (personal) income tax, this may not be the right thing,” Finance Minister Omar Malhas said in remarks after the cabinet meeting, adding the goal was to push that to eight percent. The draft legislation was submitted to parliament.
The IMF’s three-year Extended Fund Facility program aims to generate more state revenue to gradually bring down public debt to 77 percent of GDP in 2021, from a record 95 percent.
A few months ago Jordan raised levies on hundreds of food and consumer items by unifying general sales tax (GST) to 16 percent — removing exemptions on many basic goods.
In January subsidies on bread were ended, doubling some prices in a country with rising unemployment and poverty among its eight million people.
The income tax move and the GST reforms will bring an estimated 840 million dinars ($1.2 billion) in extra annual tax revenue that will help reduce chronic budget shortfalls normally covered by foreign aid, officials say.
Corporate income tax on banks, financial institutions and insurance companies will be pushed to 40 percent from 30 percent. Taxes on Jordan’s phosphate and potash mining industry will be raised to 30 percent from 24.
The government argues the reforms will reduce social disparities by progressively taxing high earners while leaving low-paid public sector employees largely untouched.
“This is a fair tax law not an unfair one,” said Malhas, who shrugged off criticism the law is lenient on many businesses connected to politicians whose transactions are not subject to tax scrutiny.
Husam Abu Ali, the head of the Income and Sales Tax Department, said a proposed IMF-recommended Financial Crime Investigations Unit will stiffen penalties for tax evaders. Critics say it will not tackle pervasive corruption in state institutions.
Abu Ali said the government could be losing hundreds of millions of dollars through tax evasion, which is as high as 80 percent in some companies.
The amendments lower the income tax threshold and raise tax rates. Unions said the government was caving in to IMF demands and squeezing more from the same taxpayers.
“It is penalizing a group that has long paid what it owes the state,” the unions syndicate said in a statement.
“It imposes injustice on employees whose salaries have barely coped with price hikes rising madly in recent years.”