Over the past 10 years, Jordan has had success pursuing structural reforms in education, health and privatization and liberalization. The Government of Jordan has been introducing social protection systems and reforming subsidies, creating the conditions for public-private partnerships in infrastructure and making tax reforms, including tax administration and management. In 2015, it has also focused on identifying concrete steps towards enhancing the investment climate and ease of doing business.
Adverse regional developments, in particular with the Syria and Iraq crises, remain the largest recent shock affecting Jordan, as reflected in the large refugee influx, disrupted trade routes and lower tourism inflows.
Despite larger financing of utility companies in 2014, the central government fiscal deficit improved thanks to continued fiscal consolidation efforts and a steadily expanding economy. While fiscal policy remains tight through 2015, the Central Bank of Jordan (CBJ) maintains its expansionary monetary policy.
Real GDP growth is forecast at 2.5% in 2015, reflecting an unexpected deceleration in the first quarter of the year but yet stronger private consumption and a narrower trade deficit, in part driven by lower oil prices. Real GDP growth is forecast at 3.7% in 2016, additionally reflecting investment projects in the medium term.
Nonetheless, Jordan faces daunting challenges due to the regional instability, high unemployment, a dependency on grants and remittances from Gulf economies and continued pressure on natural resources.
It will remain indispensable for Jordan to continue diversifying its energy supply in the medium term in order to reduce the large twin deficits and macroeconomic vulnerabilities. Sound economic policies and growth-enhancing reforms will also be necessary to reduce the country’s vulnerability to external shocks.
Creating conditions for increased private investment and improved competitiveness will help deliver the growth needed to generate employment and reduce poverty.
Last Updated: Sep 29, 2015