Jordan

Steady moderate growth in 2024

Private consumption (75% of GDP) is expected to remain the key contributor to growth on back of moderate inflation despite high unemployment (around 23% in Q1 2023). Food and energy subsidies will also continue to have a moderating effect on inflation. However, persistently elevated commodity prices and tight monetary policy (the central bank’s main rate stood at 7.5% as of July 2023 vs. 2.5% in February 2022) will continue to add to construction costs. That said, investments (around 20% of GDP) are expected to support growth performance in line with the authorities’ willingness to expand the country’s renewable energy resources, particularly in solar power. Jordan intends to increase the share of renewable sources in its energy mix to 50% by 2030 from current 20%. Public investments in transportation projects will also support growth. In July 2023, the government unveiled two construction projects involving the construction of a sports city and a tourism centre for a combined value of USD 780 million. These projects should be backed by foreign investments and regional development funding. In Q4 2022, the Saudi Jordanian Fund for Medical Educational Investment Company (SJFMEI), a wholly-owned subsidiary of the Saudi Jordanian Investment Fund (SJIF), signed a contract with Dar Al Handasah Consultants to provide construction management services for a new USD 400 million healthcare project in Amman. Government spending (around 20% of GDP) is expected to remain sluggish in line with the IMF program, although social supports for lower income households will remain in place. Contribution of net exports (around -15% of GDP) based primarily on phosphates, potash and clothing will play an important role in growth following the free trade agreement between Jordan and the EU that entered into force in 2022. Tourism revenues are expected to climb to 30% of GDP and account for around USD 16 billion in 2024, i.e., an estimated increase of 20% from a year earlier. However, Jordan’s dependence on imports will remain, reducing the contribution of net exports to GDP.

Twin deficits will persist in 2024

An estimated increase in fertiliser prices in line with higher global commodity prices will raise Jordan’s export revenues in 2024 by an estimated 2% yoy. But the trade in goods deficit (20% of GDP) will subsist due to strong domestic demand for imported fuels, food, gold (seen as a traditional safe haven investment), machinery and equipment, and intermediate goods. An expected further increase in tourism revenues will keep the services account in surplus at around 5% of GDP. The primary income surplus which depends mostly on the Jordanian expatriate workers in Saudi Arabia is expected to remain flat at around 2% of GDP in 2024. Grants (around 7% of GDP, with budget support and project grants) from international donors such as the IMF, GCC, US and EU will support the narrowing of the current account balance and contribute to its financing in 2024.

Fiscal consolidation is expected to continue in line with the IMF program’s targets. The continued growth in the economy and the introduction of reforms to improve tax collection (i.e., e-invoicing, e-audit systems, track-and-trace measures for alcohol etc.) will generate greater tax revenues (70% of total revenues). Total external grants are expected to reach 2% of GDP in 2024 with particularly the US, Jordan’s top external donor, increasing its aid to USD 1.45 billion per year for 2024-2029 from USD 1.28 billion between 2018 and 2022. The expenditure side, however, remains more rigid due to the financial challenges brought about by electricity and water system inefficiencies and by subsidies that the authorities are forced to maintain in order to avoid social discontent. The operating balance of National Electric Power Company (NEPCO) is estimated to remain in deficit by around 1% of GDP in 2024. Current expenditures, still led by wages and military expenditures, will inch down to around 27.4% in 2024, compared with 27.8% in 2023 as per the IMF’s condition. Capital expenditures will remain around 4% of GDP in line with the projects related to the 2023-2033 Economic Modernisation Vision plan which depends on foreign funds for its financing.

Fragile social context

High unemployment, availability of affordable basic goods and services, and economic inequality represent key challenges for Jordan as they could lead, as has already happened on several occasions, to dissatisfaction among the population and to protests. Moreover, on top of Palestinian refugees, Jordan has been dealing with a significant influx of refugees, particularly from Syria, which may strain limited resources. Jordan faces water scarcity issues, which is a potential source of internal and external friction and disputes over water resources. The country is situated in a turbulent region with ongoing conflicts in three neighboring countries. Escalation of these conflicts could potentially impact Jordan's security and stability. Jordan’s government will continue to adopt a pragmatic approach towards all of its neighbours: Syria and its leader Bashar al-Assad despite the US sanctions, and Iraq and Israel. Relationships with donors are likely to remain close. The last parliamentary elections were held in 2020 with a voter turnout of only 30% owing to the concentration of power. No elections are scheduled for 2024.

*Overall central government balance excluding grants

**includes grants

*** Government and guaranteed gross debt, net of SSC’s holdings

Last updated: September 2023