Overview

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.

Adverse regional developments, in particular with the Syria and Iraq crises, remain the largest recent shock affecting Jordan, as reflected in weaker investor confidence. The trade in goods balance widened in 2014 due to higher energy imports compensating the disruption of gas supply from Egypt. 

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, the Central Bank of Jordan (CBJ) maintains its expansionary monetary policy. Real GDP growth is forecast at 3.5 % in 2015 and 3.9 % in 2016 due to stronger private consumption and investment, in part driven by lower oil prices and investment projects.

Nonetheless, Jordan faces daunting challenges due to the regional instability, high unemployment, a dependency on remittances from Gulf economies and continued pressure on natural resources.

Diversifying Jordan’s energy supply in the medium term will be indispensable 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. Staying the course with the fiscal consolidation program may prove challenging but is necessary to maintaining a strong economic performance.

Jordan Economic Monitor

Last Updated: Mar 01, 2015

The Country Partnership Strategy (CPS) is supporting Jordan in its efforts to build stronger growth resilience and foster job creation.

When the CPS was launched, the Syrian conflict was just starting to impact neighboring countries but its spillovers had not reached the devastating and potentially long-lasting proportions witnessed since then. Jordan’s ability to adapt to this evolving regional context and move ahead with key reforms will be critical for the country’s success in the coming years.

While the overall thrust of the CPS remains relevant, the Bank’s strategy was adjusted (CPS Progress Report released in August 2014) to reflect the evolving country context and to link with the World Bank Group’s twin goals of ending poverty and promoting shared prosperity. Strengthening its resilience to respond to shocks on the economic front will be critical for Jordan in order to ensure the economy can grow in this challenging period. Seeking opportunities to enhance the underpinnings of competitiveness could considerably strengthen the country’s position as a regional hub in a troubled regional context and contribute to achieving shared prosperity. Mitigating vulnerabilities at the central and local level will be crucial for Jordan to help reduce poverty.

As of March 2015, the World Bank’s active portfolio in Jordan includes 31 projects valued at US$470.8 million dollars in loans and grants. The portfolio comprises investments in urban development, education, energy, environment, public sector governance, public administration, social services, finance, and private sectors.

Over the past few years, the World Bank has supported Jordan’s capacity and performance in governance, fiscal management, public sector efficiency and private sector-led growth, through two Development Policy Loans, US$250 million dollars each. It also provided support to bolster Jordan’s resilience to the Syrian crisis. The large influx of refugees from Syria has strained the government’s capacity to deliver basic services and led to an increase in social tension, as well as in competition for jobs.

An emergency loan of US$150 million dollars, approved in July 2013, helped affected households maintain access to healthcare services and basic household goods. A complementary Emergency Services and Social Resilience Grant of US$54.3 million dollars, approved in October 2013 leveraged grants from the United Kingdom, Canada, Sweden and Switzerland. This project is helping municipalities strengthen their service delivery capacity, supporting local economic development, and fostering social cohesion in host communities.

 

Last Updated: Mar 01, 2015

Micro, Small and Medium Enterprise (MSME) development for inclusive growth project has resulted in the creation of over 2,000 private sector jobs for the most disadvantaged segments of society. 62% of the project’s beneficiaries came from outside Amman, where unemployment and poverty rates are high. Women-owned enterprises represented 85% of the beneficiaries. Youth, who suffer from the highest unemployment rates, represented more than 45%.
 
Second Education Reform for Knowledge Economy project has contributed to the expansion of quality kindergartens and highly innovative, alternative childcare all over the country, with the gross enrolment rate increasing from 51.8% in 2009/10 to 60.1% in 2014. A system was created to allow the Ministry of Education to publish monitoring and evaluation reports online. New schools and extensions were built. Enrolment rates in primary and secondary schooling increased from 96.9% to 98.1%, and 60.4% to 76.9%, respectively.

Syrian crisis response:

Emergency Services and Social Resilience Program (ESSRP) grant helped seven municipalities respond to the increased demand for services due to the large influx of Syrian refugees. In the first year of implementation, the project funded goods, works and basic services amounting to $20 million dollars. This included solid waste collection, rehabilitation of basic infrastructure, improvements to the roads network, lighting in the streets, and addressing rising community tensions. For 2015, the Project’s scope was expanded to reach 16 municipalities.

Justice Sector Reform project (Japan Social Development Fund & State and Peace-building Fund) provided improved legal services to vulnerable communities, including poor Jordanians, and Iraqi, Palestinian, and Syrian refugees. The project is implemented by the Justice Center for Legal Aid (JCLA), a Jordanian civil society organization.  In 2014, JCLA accepted 2,400 new cases for legal representation, of which over 1,800 were related to family law. Consultations were provided to 4,500 beneficiaries and 1,600 public awareness sessions were held, reaching more than 40,000 beneficiaries. 

International Finance Corporation (IFC) has maintained a strong program in Jordan with long-term finance investments totaling almost US$1 billion dollars, of which US$530 million has been mobilized from other investors from January 2011 to date. Landmark investments in the renewable energy sector include: (i) Tafila Wind - US$221 million debt package to finance the country’s first privately owned renewable energy facility; (ii) “Seven Solar Sister” - US$208 million financing package to support the largest private sector-led solar PV initiative in the MENA region. Other recent investments include a repeat investment of around US$94 million in Queen Alia Airport, US$11 million in Luminus, the leading private vocational and technical training provider in the country, and US$2 million to FINCA Jordan, a leading microfinance organization. The Fiscal Year 2015 pipeline includes several investments in renewables as part of the Jordan Renewable Program, and continued support of the financial sector including through IFC’s trade finance program.  IFC has also continued to provide advisory services to strengthen financial infrastructure (credit bureau, secured lending), build the capacity of microfinance institutions, improve corporate governance, simplify business inspections, and advance energy efficiency.

Multilateral Investment Guarantee Agency’s (MIGA) outstanding gross exposure from investments into Jordan stood at US$256.1 million as of January 2015. In FY13, MIGA issued a US$13 million political risk insurance guarantee to a U.S. investor for the expansion of the AS Samra Wastewater Treatment Expansion Project. MIGA’s other active project in Jordan involves the expansion and operation of existing bromine and bromine derivatives manufacturing plants. MIGA issued a US$199.8 million guarantee for that project covering an equity investment by Albemarle Corporation (United States) in Jordan Bromine Company Limited in FY12. MIGA’s support to foreign private investors sends a strong signal that Jordan remains a viable investment destination.

 

Last Updated: Mar 01, 2015


LENDING

Jordan: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments