Jordan has one of the smallest economies in the Middle East, and its lack of natural resources and water scarcity make it heavily dependent on foreign aid and foreign investment. Following the global financial crisis of 2008 growth slowed significantly; the deteriorating regional situation since 2011 and subsequent mass influx of Syrian refugees has made recovery difficult, though
marginal increases in growth are predicted in coming years. Growth is also hampered by underlying structural issues which need to be addressed, notably unsustainable expenditure on subsidies and high levels of public debt. The government is committed to reform and has taken a number of steps in this regard, but it is constrained by the need to maintain public support, particularly among its traditional Transjordanian (Jordan’s ‘original’ population) support base.
Looking ahead, Jordan faces significant challenges, particularly in relation to hosting a vast Syrian refugee population, and the risks of on-going/heightened regional instability and conflict. However, there is also potential for strengthened economic growth, particularly if the requisite reforms are implemented. The key points emerging from the literature are as follows:
- Macroeconomic performance is mixed: Jordan’s annual GDP growth dropped from 8 per cent prior to the 2008 global financial crisis to 2.6 per cent in 2011. It has since recovered slightly, and predictions for 2016 range from 2.6 per cent to 3.5 per cent (ibid and World Bank). However, the trade deficit is high at 26.3 per cent in 2015 – largely because of the reliance on energy and food imports – and expenditure exceeds revenues, resulting in a fiscal deficit of 6.6 per cent in 2015 (down from 12.7 per cent in 2012). The debt to GDP ratio has risen alarmingly from 57 per cent in 2011 to 90 per cent in 2015. While foreign currency reserves are high and inflation is stable, the informal sector is significant accounting for an estimated 25 per cent of GDP (BTI, 2016: 23) and unemployment levels are high, particularly among the young.
- Key sectors and trading partners: The Jordanian economy is dominated by the services sector, which accounts for 70 per cent of GDP (2010) and 80 per cent of employment (SNAP, 2014: 4). The main exports are mineral and chemical products, manufactured goods and food products, while the main imports are oil, grains, other food products and vehicles (SNAP, 2014). Jordan’s main trading partners are MENA countries, the EU, US and China.
- Refugee crisis impact: The influx of over 650,000 Syrian refugees has placed a huge burden on Jordan’s infrastructure and public services. However, the Jordanian economy has also benefited from the Syrian capital, increased expenditure, increased rental income and ready availability of cheap labour (SNAP, 2014). The overall economic impact of the refugee crisis is debated, but looking ahead, as donor funding diminishes and pressure on services and jobs increases, the effects are likely to be negative.
- Fiscal reforms: King Abdullah is committed to neoliberal economic reform, and this has also been a requirement under agreements with the IMF. However, a legacy of providing public sector jobs, and generous fuel, food and other subsidies, means that efforts by the government to reduce these have aroused strong public opposition. A limited programme of reforms has been implemented to date. Nonetheless, international institutions such as the IMF and World Bank have expressed confidence in the country’s macroeconomic policies.
- Energy and water scarcity: Jordan is dependent on imports for 96 per cent of its energy (SNAP, 2014: 4). Instability in Egypt disrupted fuel supplies from there, forcing Jordan to buy elsewhere at higher prices. However, the government has signed agreements with Shell, and Gulf countries for the supply of energy, and is actively pursuing energy diversification and independence, e.g. through wind and solar power projects and nuclear power (IJzerloo, 2016). Jordan is among the world’s five most poor countries in terms of water, a problem exacerbated by weak management and, in recent years, the refugee crisis. The government has reached an agreement with Israel and the Palestinian Authority for the supply of water from the Red Sea (Sharp, 2016).
- Vision 2025 and sectoral opportunities: The government has articulated a ten-year plan to boost GDP growth and reduce public debt. The strategy for this is export-orientated and cluster-based, seeking to expand sectors that are doing well, and develop related sectors. Specific sectoral opportunities include for oil shale extraction in the energy sector, development of ICT and a knowledge economy, and promotion of tourism.