major macro economic indicators
|2014||2015||2016 (f)||2017 (f)|
|GDP growth (%)||3.0||2.4||2.5||3.0|
|Inflation (yearly average) (%)||2.9||-0.9||-0.5||2.3|
|Budget balance (% GDP)||-9.9||-4.1||-3.8||-4.0|
|Current account balance (% GDP)||-6.8||-9.0||-9.0||-8.9|
|Public debt (% GDP)||89.0||93.4||94.4||93.9|
- Political and financial support of the Gulf monarchies and the West
- Major producer of phosphates and potash
- Expatriate remittances and tourism, significant sources of currency
- Lack of natural energy resources and productive base
- Vulnerability to global economic variables and political instability in the Near and Middle East
- Imbalance of public and external accounts, resulting in dependence on foreign aid and capital
- Scale of unemployment
Robust growth despite the increasingly fragile regional situation.
Jordan will continue to deal with spillovers from the Syrian crisis and the slowdown in the GCC countries. However, the economy proved resilient in 2016 buoyed by an expanding financial sector, as well as growth in the communication and transport sectors whilst the manufacturing sector and the tourist industry struggled to maintain their vitality. In 2017, major public investments and an upsurge in FDI flows under the “Jordan Compact” plan will make positive contributions to growth. During the London conference in February 2016, Jordan presented a plan aimed at improving the integration of Syrian refugees, in excess of one million people, within the Jordanian economy. In return the Hashemite Kingdom would receive aid from international development organisations as well as the financial and economic support of the European Union and the United States. Eleven economic zones with large refugee population will be established and be granted preferential access to the European market, as well as special conditions aimed at increasing their attractiveness. In 2016, Jordan also applied to the IMF for a loan as part of the Extended Fund Facility, in an amount of USD 723 M. This reflationary policy however could be diluted because of the slowdown in the economies of the Gulf region countries, which will continue to have negative repercussions for the construction and tourism sectors, as well as for remittances from workers abroad. Economic stagnation and falling global raw material prices have resulted in the re-emergence of deflationary pressures. The expected increase in energy costs as well as the economic upturn would however point towards rising prices for 2017.
Consolidation of the public deficits
The deficit in the public accounts improved somewhat in 2016 despite the almost flat economy. The budget consolidation plan implemented with the support of the IMF since 2012 has achieved a more than 50% reduction in the public deficit since 2014. The fall in oil and gas prices enabled the national electricity utility NEPCO to balance its books. In addition, the removal of energy subsidies resulted in a reduction in current spending. Debt servicing costs are also lower and reflect the improved management of the debt stock, which is mainly concessional. Wages as well as military expenditure have however continued to increase. In 2017, the public deficit will hold steady. Investment spending is expected to increase but this will be financed by increased taxes on tobacco and alcohol as well as thanks to an overhaul of the legislation on tax loopholes. The challenge for the budget consolidation will remain the stabilisation and reversal of the debt trajectory.
An improving current account situation
Jordan is a net importer of oil and gas. The fall in oil and gas prices in 2016 should therefore have had a positive impact on the current account. But this was largely cancelled out by the decline in exports, in tourist revenues and expatriate remittances. In 2017, the current account deficit should contract slightly. The continued conflict in Syria will remain a hindrance on exports and tourist revenues but the reopening of the trade routes with Iraq, in particular the Amman-Baghdad route should help boost exports. In addition, the Kingdom should feel the positive upshots of the access to the European market following the ratification of the “Jordan Compact”. The gradual rise in energy prices however will increase the cost of imports although Jordan is working to diversify its sources of gas. Remittances from workers abroad will continue to feel the impact of the slowdown in the member countries of the GCC which could result in a reduction in its currency reserves. In 2016, these amounted to USD 15.8 M, or 8.4 months’ imports.
An oasis of political stability in an increasingly complex regional conflict.
The parliamentary elections of September 2016 led to only minor changes in the political landscape of Jordan. The turnout for the elections was very low despite the involvement of the Islamic Action Front party, with links to the Muslim Brotherhood, which had boycotted the previous two elections in 2010 and 2013. There is a danger that Jordan could experience a rise in social tensions, namely between the Jordanian population and Syrian and Iraqi refugees. As a country bordering Syria and Iraq, Jordan is directly affected by the chronic instability in the region. The country has been spared the worst of the conflict but ongoing regional instability could have negative repercussions on stability and security within Jordan. There are more than 2000 Jordanians fighting with Daesh and Jordan is regularly listed as a target for the jihadists.
Last update: January 2017