Jordan: Economic and Political Overview

Economic Indicators

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The Jordanian economy, severely impacted by the refugee influx and grown increasing dependence on international grants that followed the Syrian and subsequent refugee crisis, had to deal with the global effect of the COVID pandemic since 2020. Nevertheless, its GDP growth amounted to 2.2% in 2021, from -1.6% in 2020, and remained at 2.4% in 2022 (IMF, 2023). According to the updated IMF forecasts from January 2023, GDP growth is expected to reach 2.7% this year and then to 3% in 2023, subject to the post-pandemic global economic recovery.

Jordan is one of the few countries in the Middle East that does not rely as much on its natural resources due to scarcity of hydrocarbon and water resources. Nevertheless, it is also one of the most committed countries to financial reforms within its region (privatisation, tax reforms, opening of the banking sector, etc.). Jordan has implemented reforms under the terms of the extended fund facility that it negotiated with the IMF in 2016 and the subsequent fiscal consolidation policies brought down the government budget balance to a deficit of 6.4% of GDP in 2020, 5% in 2021 and 4% in 2022. This trend is expected to continue with government balance anticipated to reach a deficit of 4.3% by 2023 and 4.4% in 2024. The IMF estimates that public debt was 91.9% of GDP in 2021 and 91% in 2022, will stabilise in 2023 (90.6%) and should reduce to 87.4% in 2024. At the same time, Jordan renewed its agreement with the IMF at the start of 2020 on a two-year arrangement under the extended fund facility for around USD 1.3 billion. Jordan adopted a comprehensive IMF-backed income tax law at the end of 2018, which provides for a gradual increase of corporate tax rates from 2019 to 2024. Industrial, pharmaceutical and clothing activities, that currently benefit from reduced tax rates, will be imposed at the same rate as the rest of businesses as of 2024. However, the effective corporate tax is even higher as Jordan introduced at the start of 2019 a new national contribution tax on the taxable income of all corporations in Jordan, at varying rates from 1% to 7%, as part of its efforts to pay off the national debt. While Jordan's macroeconomic dynamics are set to improve, global financing conditions and regional instability continue to challenge the economic growth, limiting the scope of foreign investment. Jordan's current account deficit, 6.7% of GDP in 2022, is expected to narrow to 4.8% of GDP in 2023 and 4% in 2024. The country's external position remains fragile given considerable financing requirements. Inflation fell to 0.4% in 2020 from 0.7% a year earlier but increased to 1.3% in 2021 and 3.8% in 2022. It is expected to reach 3% in 2023 and 2.5% in 2024 amid tight monetary policies and sluggish demand.

Modest economic growth, high unemployment and limited job creation raise concerns about the extent of poverty reduction that can be achieved. Despite low economic contraction in 2020, household recovery may be slow and uneven. Larger households, young, female, informal workers and those in interaction-intensive services sectors will likely see depressed incomes for longer (world Bank, 2022). In 2023, the country’s most immediate challenge remains related to the economic, social and public health impacts of the COVID-19 pandemic. In addition to the humanitarian and financial crisis caused by the influx of Syrian refugees, Jordan also has to deal with a high unemployment rate, that rose further to 24.4% by the end of 2021 (IMF, 2022), a high poverty rate and high levels of inequality. In the long-term, the Jordan Unemployment Rate is projected to trend around 24% in 2023 and 20% in 2024, according to the Trading Economics econometric models (Trading Economics, 2023). Unemployment affects university degree holders and women much more negatively, further contributing to inequalities. However, Jordan's development has benefited from international aid as the country has been able to become a central element of stability in the Near and Middle East, ensuring peace on the borders it shares with its neighbouring countries.

Main Sectors of Industry

Agriculture represented 4.7% of the GDP and employed 2% of the workforce in 2022 (World Bank, 2023). The lack of water creates an obstacle to agricultural development. The principal crops are wheat, barley, lentil, tomato, cucumbers, eggplant, citrus fruits, olives, strawberries and grapes. Phosphates and potassium are the only natural resources of the country. Six uranium deposits, accounting for 3% of the world's reserves, were discovered in recent years and the country has signed around 20 international agreements in the field of atomic energy.

Industry contributed 23.7% of the GDP and employed around 24% of the workforce in 2022 (World Bank, 2023). Mining and quarrying (mainly phosphate and potash) are among the major industries. The manufacturing sector is rather limited and dominated by textiles, a sector presently in a state of crisis due to international competition.

The services sector, which employed 61.1% of the workforce, contributed 61.6% of the GDP in 2023 (World Bank,2023). Communication technologies and financial services are particularly active in the country. The sectors of distribution and tourism infrastructure also contribute substantially to GDP, although they experienced a slowdown in recent years. The construction and transport sectors are constantly expanding.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	2.5	24.5	73.1
Value Added (in % of GDP)	4.7	23.7	61.1
Value Added (Annual % Change)	2.8	3.0	1.9

Source: World Bank - Latest available data.

 

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Monetary Indicators	2016	2017	2018	2019	2020
Jordanian Dinar (JOD) - Average Annual Exchange Rate For 1 MUR	0.02	0.02	0.02	0.02	0.02

Source: World Bank - Latest available data.

 

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:

64,6/100

World Rank:

69

Regional Rank:

6

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

5.33/10

World Rank:

65/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Foreign Trade in Figures

Jordan is very open to international trade, so much so that there is a dependence on foreign capital; however, its relative share of GDP has diminished considerably after 2014 and was standing in 2021 at 81% (World Bank, 2023). Exports are spearheaded by the textile industry, followed by the chemical and mining sectors (fertiliser, medicine, potash and phosphate). Jordan mainly imports machinery and transport equipment, gas, crude and petroleum products, food, manufactured chemicals and electrical machines.

The United States was by far the main destination for Jordanian exports (22.1% of all exports), followed by India (10.9%), Saudi Arabia (10.5%), Iraq (8.4%) and the United Arab Emirates (4.4%). China (15.9%) and Saudi Arabia (12.3%) were the main supplier of goods in Jordan, remaining ahead of the United States (8.3%), Germany (4.3%) and the UEA (3.7%). Jordan is a member of the WTO and signed a free-trade agreement (FTA) with the U.S in December 2001, allowing the removal of customs duties on the majority of goods and services since 2010 when it was fully implemented. Jordan has also signed an Agreement of Association with the EU. In 2016, the EU announced that it would facilitate the entry of Jordanian exports in order to support the economy and integration of Syrian refugees. Jordan cancelled its free-trade agreement with Turkey at the end of 2018, citing its feasibility and negative impact on local manufacturing. This agreement was replaced by another free-trade deal at the end of 2019. In addition to the United States, Jordan is also party to bilateral trade agreements with Canada and Singapore and is a signatory to several regional trade agreements including the European Free Trade Association (Norway, Switzerland, Liechtenstein), Greater Arab Free Trade Agreement (GAFTA), and Aghadir Agreement (Egypt, Morocco, Tunisia) which is connected to the Association Agreement (EU).

On 6 October 2022, Jordanian Minister of Planning and International Cooperation Nasser Shraideh announced to sign an agreement with the European Investment Bank (EIB) regarding food security in Jordan worth €130 million (Jodan News, 10/06/22).

Jordan's trade balance is structurally in deficit, mainly because of the country's reliance on hydrocarbon imports. The exports of goods amounts to USD 9.35 billion and the imports of goods to USD 21.61 billion in 2021. The Kingdom's trade deficit increased during 2021 by 23.7% to reach 9.87 billion USD, compared with the same period in 2020, where it stood at 7.98 billion USD (Jordanian Department of Statistics, January 2023). The volume of total exports in 2021 was 13.76 billion USD, compared with 10.26 billion in 2020. (Jordanian Department of Statistics 2022).

Sources of General Economic Information

Ministries

Ministry of Economy, Industry and trade
Ministry of Finance

Statistical Office

Department of Statistics

Central Bank

Central Bank of Jordan

Stock Exchange

Amman Stock Exchange

Search Engines

Baladna
Google Jordan

Economic Portals

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