port bill driven by the recovery in oil pric- JORDAN es; ii) economic slowdown in GCC as re- Recent developments flected by stagnant remittances, declining inflows and decreasing domestic exports Real growth in 2017 is forecasted at 2.1 to GCC countries; iii) weak recovery in percent, a 0.1 percentage point (pp) pick- domestic exports via Iraq as trading activi- Table 1 2016 up from 2016. The tempered increase is ty remains well below pre-Turaibil border Population, million1/ 9.5 due to a resurgence in tourism as reflected closure levels1. GDP, current US$ billion 38.8 by double digit growth in receipts and On the monetary front, Jordan’s monetary GDP per capita, current US$ 4098 arrivals, although largely reflecting low- policy continues to target the exchange Poverty rate ($2/day 2005PPP terms)a 1.8 base effects. Moreover, mining and quar- rate dollar peg with the Central Bank of Poverty rate ($4/day 2005PPP terms)a 25.4 rying sector is also regaining momentum Jordan (CBJ) having raised interest rates Gini Coefficienta 33.7 as commodity prices stabilize. The mining four times since December 2016—once by School enrollment, primary (% gross)b 97.3 and quarrying sector grew by 15.8 percent 50 basis points (bps) and three times by 25 in the first three quarters of 2017 (3Q-2017) bps each—in attempts to maintain an Life Expectancy at birth, yearsb 74.1 compared to a 14.7 percent deterioration attractive risk premium over the Federal Sources: World Bank WDI and Macro Poverty Outlook. over the same period in 2016 (Figure 1). Reserve Board (FED) rates. Moreover, Notes: Jordan’s fiscal situation improved in 2017 central bank’s foreign reserves continue to (a) Most recent value (2010) (b) Most recent WDI value (2014) as a result of government’s fiscal consoli- be subject to downward pressures stem- 1/ Based on staff projections. 2015 census figures have been released reflecting a total population of 9.5 million of which dation efforts in line with the International ming from lower foreign inflows, ex- 6.6 million Jordanians. The balance of non-Jordanians in- Monetary Extended Fund Facility (IMF- change market pressure and higher dollar- cludes a sizeable refugee population (not yet available). EFF) program. The fiscal deficit, including ization rates, in turn declining to US$ 12.3 grants, contracted to 2.6 percent of fore- billion by end-2017 (covering 6.8 months casted GDP in 2017, 0.6 pp narrower than of imports, excluding re-exports). After a 2016 levels. The narrowing in fiscal bal- two-year deflationary period, headline Jordan’s economy remains in a low- ances was driven by an upsurge in reve- consumer prices rebound, registering an growth scenario. Improvements in tour- nues (despite reduction in grants) coupled annual average of 3.3 percent in 2017. The ism and mining and quarrying are ex- with a contraction in expenditures as rebound in prices was mainly due to the share of GDP. Nevertheless, the improve- global recovery in oil prices. pected to have driven timid improvement ment is still less than what was initially Jordan’s labor market continues to face in growth in 2017; however, the economy envisaged by the program on the back of significant vulnerabilities. The unemploy- remains burdened with ongoing uncer- weaker growth. Debt increased to US$ ment rate remained elevated at 18.5 per- tainty in Syria, slow revival of economic 38.5 billion by end-2017, standing at 95.8 cent in the fourth quarter of 2017 (Q4- cooperation with Iraq, and economic slow- percent of forecasted GDP, compared to 2017), while unchanged compared to Q3- 95.1 percent by end-2016. 2017, it is a deterioration from Q1 and Q2 down in the Gulf Cooperation Council Despite the strong rebound in exports of levels (which stood at 18.2 and 18.0 per- (GCC). In addition, the economy is sub- services (propelled by tourism), Jordan’s cent, respectively). Meanwhile, the labor ject to a slow pace of structural reforms current account deficit is expected to re- force participation rate averaged 38.1 per- that is impeding a strong recovery in main elevated in 2017 due to a confluence cent in Q4-2017, declining from 39.2 per- of factors related to: i) higher energy im- cent in Q3-2017. On an annual basis, un- growth. FIGURE 1 Jordan grapples with sluggish growth. FIGURE 2 Jordan’s labor market exposes significant gender- based heterogeneity in in 2017. Sources: Department of Statistics and World Bank Staff Calculations. Sources: Department of Statistics and World Bank Staff Calculations. * Refined economic activity rate refers to the labor force attributed to the population 15 years and over. MPO 1 Apr 18 employment and labor force participation ary monetary efforts, which have been ward looking and geared to supporting rate averaged 18.3 and 39.2 percent, re- mitigated by government’s efforts to limit markets in GCC, Syria, and Iraq, the re- spectively; both exposing significant mar- crowding out by using external financing gional violent conflict and displacement ginalization of females (Figure 2), youth to cover its fiscal needs. In addition, the will continue to affect the economy. Jor- and bachelor degree holders. recent (end-August) reopening of the dan’s long-term macroeconomic vulnera- Poverty is likely to have risen in Jordan Karameh trade route be-tween Jordan and bility stems from sizable internal and ex- given rising inflation, unemployment, Iraq is expected to have a positive impact ternal imbalances that generate large fi- joblessness, and sluggish growth. Jordan on international trade over the medium nancing needs, which are typically met via has not released poverty estimates since term, especially through trade corridor international assistance and transfers from 2010 due to issues with data quality for spillovers. the region. When these sources of finance the 2013/14 Household Expenditure and are reduced, financial and economic sta- Income Survey (HEIS). The 2017/18 HEIS, Jordan’s current account deficit is ex- bility can be compromised. which will be representative of Jordanian, pected to narrow gradually over the medi- Non-Jordanian and Syrian Nationals was um term mainly on the back of improving 1 The Turaibil border is the only trade initiated in August 2017. merchandise and tourism exports, outpac- route between Jordan and Iraq. Rising ing import growth due to higher energy security concerns forced its closure early imports (mirroring higher oil prices). Cur- in 2015, but was later reopened on 30 Au- Outlook2 rent transfers and capital inflows are an- ticipated to remain sluggish given sub- gust 2017. 2 Fall 2017. dued growth forecasted in the GCC econ- 3 Fall 2017. Jordan’s baseline is expected to remain omies. significantly affected by regional events in Iraq and Syria and the slowdown in GCC’s economic performance. If the pace Risks and challenges3 of economic reforms remains sluggish, we expect only a marginal pick-up in the With a difficult regional outlook, sluggish economy. Services and industry are ex- economic reforms, and contractionary pected to continue nudging the economy fiscal and monetary policies in place, it is forward. On the demand side, private difficult to foresee a strong recovery in consumption and private investment (real growth. While the reopening of trade estate) are expected to regain momentum routes with Iraq bodes well for improving in the medium term after periods of stag- consumption and investment sentiments, nation. This is despite CBJ’s contraction- given that the Jordanian economy is out- TABLE 2 Jordan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2015 2016 e 2017 f 2018 f 2019 f Real GDP growth, at constant market prices 2.4 2.0 2.1 2.4 2.5 Private Consumption 8.5 -0.3 0.1 1.1 1.8 Government Consumption 3.6 8.1 -1.6 0.8 1.3 Gross Fixed Capital Investment -8.0 -7.3 2.2 3.1 4.0 Exports, Goods and Services -9.0 -2.8 6.7 6.7 4.5 Imports, Goods and Services -3.0 -7.1 0.7 3.1 3.1 Real GDP growth, at constant factor prices 2.6 2.2 2.3 2.3 2.5 Agriculture 5.0 3.8 1.5 1.5 1.8 Industry 2.2 1.0 2.0 2.8 2.7 Services 2.7 2.6 2.4 2.1 2.5 Inflation (Consumer Price Index) -0.9 -0.8 3.1 1.9 2.2 Current Account Balance (% of GDP) -9.1 -9.3 -8.7 -8.6 -8.5 Financial and Capital Account (% of GDP) 7.3 8.6 8.1 10.1 8.6 Net Foreign Direct Investment (% of GDP) 4.3 4.0 3.9 3.9 3.8 Fiscal Balance (% of GDP)1/ -3.6 -3.2 -2.6 -1.6 -0.5 Debt (% of GDP)2/ 93.4 95.1 95.6 94.1 91.8 1/ Primary Balance (% of GDP) -0.1 -0.2 0.1 2.1 3.2 So urces: Wo rld B ank, M acro eco no mics and Fiscal M anagement Glo bal P ractice, and P o verty and Equity Glo bal P ractice. No tes: e = estimate, f = fo recast. 1/ Includes fiscal gap o f 2.0% o f GDP in 2018 and 2.5% o f GDP in 2019. 2/ Go vernment and guaranteed gro ss debt. Includes WA J estimated bo rro wing fo r 2017-201 9. MPO 2 Apr 18