Over the past 10 years, Jordan has pursued structural reforms in education, health, as well as privatization and liberalization. The Government of Jordan has introduced social protection systems and reformed subsidies, creating the conditions for public-private partnerships in infrastructure and making tax reforms. More work needs however to be accomplished so the focus, in 2015, on identifying steps towards enhancing the investment climate and ease of doing business can lead to concrete outcomes.
Adverse regional developments, in particular the Syria and Iraq crises, remain the largest recent shock affecting Jordan. This is reflected in an unprecedented refugee influx, in disrupted trade routes, and in lower investments and tourism inflows. The large number of Syrian refugees entering the country is having a strong impact on the country’s economy and social fabric. Other major challenges facing Jordan include high unemployment, a dependency on grants and remittances from Gulf economies as well as continued pressure on natural resources.
After four years of steady recovery, Jordan’s economy slowed down in 2015 for the first time since 2010, largely due to the effects of security spillovers from the regional crises. Real GDP growth was at 2.4% in 2015, compared to 3.1% in 2014. Going forward, real GDP growth is forecast to rebound slightly to 3% in 2016, reflecting additional investment projects in the medium term. A deflationary environment persisted in 2015, amidst expansionary monetary policy and tight fiscal policy.
On August 24, 2016, the IMF Board of Directors approved a three-year extended arrangement under the Extended Fund Facility (EFF) for Jordan to support the country’s economic and financial reform program. This program aims at advancing fiscal consolidation to lower public debt and broad structural reforms to enhance the conditions for more inclusive growth.
Moving forward, it will remain critical for Jordan to continue diversifying its energy supply in the medium term in order to reduce its macroeconomic vulnerabilities. Sound economic policies and growth-enhancing reforms will also be necessary to reduce the country’s sensitivity to external shocks. Finally, creating conditions for increased private investment and improved competitiveness will remain indispensable for Jordan to stimulate job-creating growth.
Last Updated: Oct 01, 2016