Over the past decade, 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. However, further progress is needed so that reforms aimed at enhancing the investment climate and ease of doing business can lead to concrete outcomes.
A major challenge facing Jordan remains to reinvigorate the economy in the context of a challenging external environment. 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. Continued regional uncertainty and reduced external assistance will continue to put pressure on Jordan.
High unemployment rate (18.4 percent in Q1-2018 compared to 18.2 percent in Q1-2017), high dependency on grants and declining remittances from Gulf economies pose a serious challenge. Jordan’s fiscal efforts so far are in line with the targeted overall fiscal balance excluding grants, but lagging grants remain a challenge. Jordan’s budget deficit, including grants, is expected to narrow further in 2018 compared to a deficit of 2.2 percent of GDP in 2018. Meanwhile, Jordan’s debt at the end of 2017 stood at 95.9 percent of GDP – an increase of 0.8 percent of GDP over 2016.
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. Further sound economic policies and the quick implementation of key growth-enhancing reforms will also be necessary to reduce the country’s sensitivity to external shocks and help reinvigorate the economy Finally, creating conditions for increased private investment and improved competitiveness will remain indispensable for Jordan to stimulate job-creating growth.
Last Updated: Oct 11, 2018