Over the past decade, Jordan has pursued structural reforms in education, health, as well as privatization and liberalization. More recently, Jordan has also made important reforms to put its economy on the path to long term prosperity, covering income tax, business regulations, insolvency and the public procurement framework. And it has revitalized trade with its neighbors, especially Iraq. The outlook for the economy reflects renewed momentum given recent signals of renewed international support through the London Initiative (February 2019). 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 crisis, 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 (particularly as a result of economic slow-down in GCC). Continued regional uncertainty and reduced external assistance will continue to put pressure on Jordan.
Jordan’s real GDP registered an estimated growth of 2 percent in 2018, marginally lower than growth in 2017, constrained by structural impediments and a difficult regional setting. High unemployment rate (18.6 percent annual average in 2018 compared to 18.3 percent in 2017), high dependency on grants and reduced remittances and official inflows from Gulf economies pose a serious challenge. According to provisional estimates for 2018, Jordan’s fiscal efforts remained below the budget target as the fiscal deficit (including grants) widened to 3.4 percent of GDP in 2018, 1.6 percent higher than the budgeted target for 2018. This was mainly due to limited revenue growth (vis-à-vis the budget targets) and limited flexibility to curtail recurrent spending. However, Jordan showed continued reform effort as evident from the enactment of the amended income tax legislation in November 2018. Public debt-to-GDP ratio marginally declined - for the first decline in a decade - to 94.2 percent at end-2018.
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 inclusive job-creating growth, boost productivity and improve household welfare.
Last Updated: Apr 01, 2019