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Economy of Jordan

Introduction

Shopping centre in Amman
Shopping centre in Amman

Jordan’s economy is among the smallest in the Middle East, with insufficient supplies of water, oil, and other natural resources, underlying the government’s heavy reliance on foreign assistance. Other economic challenges for the government include chronic high rates of unemployment and underemployment, budget and current account deficits, and government debt.

King ABDALLAH, during the first decade of the 2000s, implemented significant economic reforms, such as expanding foreign trade and privatizing state-owned companies that attracted foreign investment and contributed to average annual economic growth of 8% for 2004 through 2008. The global economic slowdown and regional turmoil contributed to slower growth from 2010 to 2017 – with growth averaging about 2.5% per year – and hurt export-oriented sectors, construction/real estate, and tourism – according to the CIA World Factbook. Since the onset of the civil war in Syria and resulting refugee crisis, one of Jordan’s most pressing socioeconomic challenges has been managing the influx of approximately 660,000 UN-registered refugees, more than 80% of whom live in Jordan’s urban areas. Jordan’s own official census estimated the refugee number at 1.3 million Syrians as of early 2016.

Jordan is nearly completely dependent on imported energy—mostly natural gas—and energy consistently makes up 25-30% of Jordan’s imports. To diversify its energy mix, Jordan has secured several contracts for liquefied and pipeline natural gas, developed several major renewables projects, and is currently [2018] exploring nuclear power generation and exploitation of abundant oil shale reserves. In August 2016, Jordan and the IMF agreed to a $723 million Extended Fund Facility that aims to build on the three-year, $2.1 billion IMF program that ended in August 2015 with the goal of helping Jordan correct budgetary and balance of payments imbalances.

Gross domestic product

Jordan’s growth outlook is strained by the precarious regional situation, the current account deficit, and a lack of fiscal space.

Economic recovery –According to the World Bank– depends on reducing debt levels and implementing structural reforms on the one hand and identifying sources to expand outward-oriented investment on the other, while taking advantage of international assistance and potential regional recovery. As such, we expect only moderate growth over the medium term, with GDP rising from 2.0 percent in 2017 to 2.1 percent in 2018, 2.3 percent in 2019 and 2.4 percent in 2020.
The drivers are expected to be by services from the supply side and net exports from the demand side.

Indicatorsmeasuring unit20162017Change ±
GDP (at constant 2010)Billion US$30.81231.4190.607
GDP per capita (constant 2010)US$3,258.53,238,3- 20.2
GDP (at current prices) Billion US$38.42339.8271.404
GDP (at current value)Billion US$38.65540.0681.413

Source: World Bank.

Industry

Industrial activity is divided into two main sectors, accounting for about 25 per cent of the gross domestic product (GDP):

· Transformative manufacturing, including leather, chemicals, food, plastic and IT. Exports from this sector accounted for 82.8 per cent of total industrial exports in 2017, according to the Ministry of Industry, Trade, and Supply.

· Mining is considered one of the most important strategic sectors, including phosphate, potash, cement, mining and limestone extraction. Exports from this sector, including its sub-sectors, accounted for 17.2 per cent of industrial exports in 2017.

Agriculture and livestock

Valleys, especially the Jordan Valley, are considered the most fertile parts of Jordan. They are characterized by their warm winters, giving them the advantage of early production of vegetables and fruits compared to the rest of the country and neighbouring countries. The highlands extend from north to south in the western part of Jordan, ranging in height from 600 to 1,500 metres above sea level. These receive the highest rainfall, have the widest natural vegetation and are home to about 90 per cent of the population.

In 2017, the area planted with field crops and grain amounted to 62,400 hectares, the area cultivated with vegetables was 49,750 hectares and the area cultivated with fruit trees was 38,410 hectares, excluding the 294,611 hectares planted with olives, according to the annual statistical report issued by the Ministry of Agriculture.

Livestock is one of the most important sub-activities of the agricultural sector, providing livelihoods and income for a significant number of rural and Bedouin residents in addition to meat and dairy products for Jordanians as a whole, according to the Department of Statistics (DOS).

The DOS Agriculture Census showed that the number of sheep and goats in Jordan reached 3.8 million head in 2017, compared to 3.1 million in 2007 and 2.8 million in 1997.

The census, released in August 2018, showed that Mafraq Governorate maintain the largest number of sheep and goats, followed by Amman. Meanwhile, Zarqa, Mafraq and Irbid have the highest number of cattle respectively (1997-2017).

The census also revealed a fluctuation in the cattle numbers, which increased by 65 per cent in 2007 compared to 1997 but declined in 2017 by 17.6 per cent compared to 2007.

Foreign trade

In 2017, total exports decreased by 1.1 per cent compared to 2016, while the value of national exports increased by 1.8 per cent over the same period. However, a 13.9 per cent decrease in the value of re-exports in 2017 compared to 2016 led to a decline in the value of total exports.

Total imports of goods and services rose by 5.6 per cent in 2017 compared to 2016. The trade balance deficit increased by 8.7 per cent in 2017 compared to the previous year.

In terms of the composition of the most significant commodities exported in 2017, the value of national exports of clothing and related accessories rose by 9.6 per cent, crude potash by 10.2 per cent and fertilizers by 21.7 per cent, whereas the value of national exports of pharmaceuticals decreased by 4.4 per cent, vegetables and fruits by 6.3 per cent and crude phosphates by 19.3 per cent.

In terms of most significant imports, the value of crude oil and its derivatives increased by 23 per cent and machinery and equipment by 39.4 per cent. Grain imports decreased by 28.2 per cent.

Poverty

The World Bank predicts that the poverty rate in Jordan is likely to increase, given the rising inflation, unemployment and stagnant growth. Jordan has not released estimates of poverty since 2010, as a result of data quality issues with the 2013/2014 household expenditure and income survey. In August 2017, the 2017/2018 household expenditure and income survey began, which aims to be representative of Jordanians, non-Jordanians and Syrian refugees.

Construction

The number of residential units licensed dropped by 10.2 per cent in 2017 compared to 2016. The number of residential building permits issued also decreased by 13.6 per cent over the same period. The estimated cost of residential buildings stood at $954.8 million, a decrease of 10.4 per cent compared to 2016.

Tourism

Jordan’s tourism revenue rose from $4.1 billion in 2016 to $4.6 billion in 2017, an increase of 12.5 per cent, according to the Central Bank of Jordan. The increase was mainly driven by the increase in the number of tourists visiting the country.

Jordan has dozens of tourist sites, most notably the ancient city of Petra, one of the New Seven Wonders of the World, the Dead Sea, which has the lowest elevation on earth and is known for its therapeutic properties, and al-Maghtas, a World Heritage site on the east bank of the Jordan River where Jesus was baptized.

Jordan’s economy is dependent to a great extent on its tourism income, which accounts for 14 per cent of GDP.

Banking

The banking sector sustained its durability and stability, according to the Jordan Banks Association recording significant developments during 2017.

Licensed bank assets increased by 1.5 per cent to reach $68.74 billion at the end of the year. Credit facilities granted by licensed banks increased by 8 per cent to $34.58 billion. Deposits also increased by 0.9 per cent to $46.48 billion. Total bank assets increased by 2.1 per cent to $65.03 billion.

International market position

Jordan was ranked 65th out of 137 countries covered by the Global Competitiveness Index 2017-2018, down two places from 2016-2017, but sustained a relatively good ranking overall, benefitting from a fairly stable and efficient institutional system as well as relatively good infrastructure, innovation and business development. The World Bank attributed this to measures taken by the government to consolidate the country’s fiscal and macroeconomic environment by raising taxes and increasing control over public spending, in response to the pressure exerted on the country by the large influx of Syrian refugees.

Labour force

According to the DOS, the public and private sectors together created 89,174 new jobs during 2017, of which 74 per cent were occupied by men and 26 per cent by women. With the exception of those who left their jobs that year, either taking other jobs or returning to their homelands if they were expatriates, the net number of new jobs in 2017 was 53,970, 6.1 per cent higher than in 2016, of which 70 per cent were occupied by men and 30 per cent by women. Jordanians occupied 91 per cent of new jobs in 2017, of which 85.5 per cent were occupied by unmarried workers.

The labour market still faces serious weaknesses, as unemployment remained elevated at 18.5 per cent in the fourth quarter of 2017, the same as the third quarter but higher than the first and second quarters (18.2 per cent and 18 per cent respectively). At the same time, the average labour force participation rate stood at 38.1 per cent in the fourth quarter of 2017, compared to 39.2 per cent in the third quarter. Over the year, unemployment and labour force participation averaged 18.3 per cent and 39.2 per cent respectively, and both indicators revealed a significant marginalization of women, youth and higher institute and university graduates.

According to the DOS, the unemployment rate for the third quarter of 2018 stood at 18.6 per cent, an increase of 0.1 per cent compared to the third quarter of 2017. The unemployment rate for men in the third quarter of 2018 stood at 16.3 per cent compared to 27.1 per cent for women. It is clear that the unemployment rate for men increased by 0.9 per cent and decreased by 2.8 per cent for women compared to the third quarter of 2017.

Infrastructure

Economy Jordan - The port of Aqaba
The port of Aqaba / Photo Shutterstock

Compared to other developing countries, Jordan’s infrastructure is well developed, with the exception of the railway system. A report of the World Economic Forum stressed that the country’s overall transportation, communications, power, and information technology – which are considered the backbone for strengthening any country’s productivity and competitiveness – were healthy.

The same report said that Jordan’s infrastructure ranked 61st out of 139 countries, scoring 4.1 out of a possible seven points.

Jordan’s roads ranked 44, port infrastructure 64, air transport infrastructure 35, electricity supplies 38, fixed telephone lines 100, mobile telephone subscriptions 68, and availability of the latest technology 49.

The government is also working to improve its national railway services. The Jordan Times recently reported that the government has completed studies for a National Railway Network, linking Mediterranean countries, including Turkey, with the Persian Gulf through Jordan. The project is expected to cost about USD 3.4 billion. Economic experts argue, though, that there are more important priorities in the kingdom’s economy. Negotiations are also underway to establish the Amman-Zarqa light-rail line, which is intended to serve the two most populous cities in the kingdom; thousands of Jordanians wait for hours every day to use public transportation to shuttle between the two cities. The government issued tenders for this project in 2005, 2007, and 2009, but it has not yet materialized.

In order to attract major international investment, the government is working to develop its infrastructure across the kingdom, including that which will serve major real-estate projects, particularly its transport sector, including the rail system, Amman’s Queen Alia Airport, and the port of Aqaba.

Energy

For an in-depth overview of Jordan’s energy sector click on the button below.

Further Reading

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