Economic growth in Jordan

Major challenges facing Jordan have affected the performance of its macro and micro economy.

Domestic factors are linked to supply and demand. External ones have a significant impact on two main components of the economy: exports and investment.

Exports have been heavily affected by the closure of our borders with Iraq and Syria. 

Exports from Syria to Europe have been completely halted. Exports to Iraq are at quite some distance, and as a result, Jordanian exporters have been severely burdened and the competitiveness of their products was negatively impacted in the Iraqi market, which has historically been the Kingdom’s first trading partner. 

On the other hand, the industrial sector had succeeded in increasing its exports by 6 per cent in 2017, depending partly on non-traditional markets, especially in East African countries.

But exports are still at a level that does not reflect the capabilities available in the Kingdom.

Net foreign investment decreased to JD1,090 million at the end of 2016, compared to JD1,135.5 million in 2015.

Investment has declined since 2012 because of the political and security turmoil in Syria, Iraq, Yemen, Libya and partly in Egypt.

FDI in 2016 was down from its level in the previous year.

The slowdown in exports and the decline in investment directly affect the employment opportunities present in the national economy, and negatively affect the chances of economic growth, which did not exceed 1.9 per cent in the fourth quarter of last year.

These two factors have greatly reduced the expected impact of oil prices remaining at around $50 a barrel.

Oil prices have, since 2008, been the biggest challenge for the industry and the national economy. Its low prices over the past few years, however, limited its impact on the economy.

Still, optimism remains strong, supported by some economic indicators that showed improvement and recovery in the first half of this year, notably the Kingdom’s receipts from tourism income, which grew by about 18 per cent and expatriates’ remittances, which grew by 3.3 per cent in the first quarter, with signs of improvement.

National exports rose by 6.6 per cent and imports fell slightly in the first quarter, leading to an improvement in trade deficit.

Optimism leads to expectations of continued improvement of the economic performance and a 2.3 per cent growth this year, according to the latest forecast by the International Monetary Fund.

The economic stimulus plan is one of the most promising tools, if implemented seriously, but the biggest reason for optimism is reopening the border with Iraq and restoring the momentum of trade in the Iraqi market.

Economic growth in Jordan can be expected, but it hinges on certain conditions.

The writer is director general of the Association of Banks in Jordan. He contributed this article to The Jordan Times.