Economic Overview
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The Jordanian economy, severely impacted by the refugee influx and grown increasing dependence on international grants that followed the Syrian and subsequent refugee crisis, had to deal with the global effect of the COVID pandemic since 2020. Consequently, its GDP growth amounted to -1.6% in 2020, from +2% in 2019. Nevertheless, growth came back in 2021 with a 2% increase of the country GDP (IMF, October 2021). According to the updated IMF forecasts from October 2021, GDP growth is expected to remain at 2% this year and then to 3.1% in 2023, subject to the post-pandemic global economic recovery.
Jordan is one of the few countries in the Middle East that does not rely as much on its natural resources due to scarcity of hydrocarbon and water resources. Nevertheless, it is also one of the most committed countries to financial reforms within its region (privatisation, tax reforms, opening of the banking sector, etc.). Jordan has implemented reforms under the terms of the extended fund facility that it negotiated with the IMF in 2016 and the subsequent fiscal consolidation policies brought down the government budget balance to a deficit of 3.2% of GDP in 2019, 2.9% in 2020 and 2.4% in 2021, from 3.6% in 2018. This trend is expected to continue with government balance anticipated to fall to a deficit of 1.6% by 2022 but then -2.2% in 2023. The IMF estimates that public debt was 88% of GDP in 2020 and 90.9% in 2021 and will stabilise in 2022 (90.6%) and should reduce to 88.4% in 2023. At the same time, Jordan renewed its agreement with the IMF at the start of 2020 on a two-year arrangement under the extended fund facility for around USD 1.3 billion. Jordan adopted a comprehensive IMF-backed income tax law at the end of 2018, which provides for a gradual increase of corporate tax rates from 2019 to 2024. Industrial, pharmaceutical and clothing activities, that currently benefit from reduced tax rates, will be imposed at the same rate as the rest of businesses as of 2024. However, the effective corporate tax is even higher as Jordan introduced at the start of 2019 a new national contribution tax on the taxable income of all corporations in Jordan, at varying rates from 1% to 7%, as part of its efforts to pay off the national debt. While Jordan's macroeconomic dynamics are set to improve, global financing conditions and regional instability continue to challenge the economic growth, limiting the scope of foreign investment. Jordan's current account deficit, 8% of GDP in 2020, and 8.9% in 2021 is expected to narrow to 4.4% of GDP in 2022 and 3.2% in 2023. The country's external position remains fragile given considerable financing requirements. Inflation fell to 0.4% in 2020 from 0.7% a year earlier but increased to 1.6% in 2021 and is expected to pick up to 2% in 2022 and 2.5% in 2023 amid tight monetary policies and sluggish demand.
Modest economic growth, high unemployment and limited job creation raise concerns about the extent of poverty reduction that can be achieved. Despite low economic contraction in 2020, household recovery may be slow and uneven. Larger households, young, female, informal workers and those in interaction-intensive services sectors will likely see depressed incomes for longer (world Bank, 2022). In 2022, the country’s most immediate challenge remains related to the economic, social and public health impacts of the COVID-19 pandemic. In addition to the humanitarian and financial crisis caused by the influx of Syrian refugees, Jordan also has to deal with a high unemployment rate, that rose further to 22.7% by the end of 2020 (IMF, 2021), a high poverty rate and high levels of inequality. In the long-term, the Jordan Unemployment Rate is projected to trend around 24% in 2022 and 20% in 2023, according to the Trading Economics econometric models (Trading Economics, 2022). Unemployment affects university degree holders and women much more negatively, further contributing to inequalities. However, Jordan's development has benefited from international aid as the country has been able to become a central element of stability in the Near and Middle East, ensuring peace on the borders it shares with its neighbouring countries.
| Main Indicators | 2019 | 2020 | 2021 (e) | 2022 (e) | 2023 (e) |
| GDP (billions USD) | 44.57 | 43.76e | 45.34 | 47.50 | 50.20 |
| GDP (Constant Prices, Annual % Change) | 2.0e | -1.6e | 2.0 | 2.7 | 3.1 |
| GDP per Capita (USD) | 4,426e | 4,286 | 4,394 | 4,565 | 4,793 |
| General Government Balance (in % of GDP) | -3.2 | -2.9 | -2.4 | -1.6 | -2.2 |
| General Government Gross Debt (in % of GDP) | 78.0 | 88.0e | 90.9 | 90.6 | 88.4 |
| Inflation Rate (%) | 0.7 | 0.4 | 1.6 | 2.0 | 2.5 |
| Unemployment Rate (% of the Labour Force) | 19.1 | 22.7 | 0.0 | 0.0 | 0.0 |
| Current Account (billions USD) | -0.95 | -3.49e | -4.05 | -2.11 | -1.62 |
| Current Account (in % of GDP) | -2.1 | -8.0e | -8.9 | -4.4 | -3.2 |
Source: IMF – World Economic Outlook Database , October 2021
Note: (e) Estimated Data
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