JORDAN ECONOMIC MONITOR REVIVING A SLOWING ECONOMY Fall 2016 Global Practice for Macroeconomics & Fiscal Management MIDDLE EAST AND NORTH AFRICA REGION The World Bank JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY PREFACE The Jordan Economic Monitor provides an update For information about the World Bank and its on key economic developments and policies over activities in Jordan, including e-copies of this the past six months. It also presents findings from publication, please visit www.worldbank.org.jo recent World Bank work on Jordan. It places them in a longer-term and global context, and assesses To be included on an email distribution list for the implications of these developments and other this Jordan Economic Monitor series and related changes in policy for the outlook for the country. publications, please contact Nada Abou Rizk Its coverage ranges from the macro-economy to (nabourizk@worldbank.org). For questions and financial markets to indicators of human welfare comments on the content of this publication, and development. It is intended for a wide please contact Léa Hakim (lhakim1@worldbank. audience, including policy makers, business org) or Eric Le Borgne (eleborgne@worldbank. leaders, financial market participants, and the org). Questions from the media can be addressed community of analysts and professionals engaged to Mona Ziade (mziade@worldbank.org). in Jordan. The Jordan Economic Monitor is a product of the World Bank’s Global Practice for Macroeconomics & Fiscal Management, (GMFDR) team. It was prepared by Léa Hakim (Economist) and Zeina Hasna (Economic Analyst), under the general guidance of Eric Le Borgne (Lead Economist) and Auguste Tano Kouame (Global Practice Manager). The Special Focus on Public Expenditure Review in the Education Sector was prepared by Samira Halabi (Education Specialist) and Dina Abu Ghaida (Lead Economist). The Special Focus on the Economic Impact of the Arab Spring on Jordan was prepared by Samer Matta (Economic Analyst). May Ibrahim (Senior Executive Assistant) provided Arabic translation and Zeina El Khalil (Communications Officer) print-produced the report. Macroeconomic projections are as of 1 September 2016. The findings, interpretations, and conclusions expressed in this Monitor are those of World Bank staff and do not necessarily reflect the views of the Executive Board of The World Bank or the governments they represent. Preface | 1 THE WORLD BANK TABLE OF CONTENTS PREFACE........................................................................................................................................................ 1 EXECUTIVE SUMMARY ............................................................................................................................... 4 …ò«ØæàdG ¢üî∏ªdG .............................................................................................................................................. 7 RECENT ECONOMIC AND POLICY DEVELOPMENTS ........................................................................... 8 Output and Demand ....................................................................................................................................... 8 Labor and Employment ................................................................................................................................. 13 Fiscal Policy................................................................................................................................................... 15 External Position............................................................................................................................................ 16 Monetary Policy and Finance ........................................................................................................................ 18 PROSPECTS ................................................................................................................................................ 21 SPECIAL FOCUS ......................................................................................................................................... 22 Advancing Human Capital Development in Jordan through Education Sector Reforms ............................ 22 I. Context ...................................................................................................................................................... 22 II. Overview of Public Education Spending .................................................................................................... 26 III.Impact of Syrian crisis ............................................................................................................................... 30 IV.Recommendations and Next steps ............................................................................................................ 32 V. Appendix................................................................................................................................................... 34 The Economic Impact of the Arab Spring on Jordan ................................................................................... 36 I. Context ...................................................................................................................................................... 36 II. Empirical Methodology ............................................................................................................................. 36 III.Data .......................................................................................................................................................... 37 IV.Results ...................................................................................................................................................... 38 V. Some Policy Recommendations to Boost Recovery................................................................................... 39 VI.Appendix .................................................................................................................................................. 41 References .................................................................................................................................................... 42 DATA APPENDIX ........................................................................................................................................ 44 SELECTED SPECIAL FOCUS FROM RECENT JORDAN ECONOMIC MONITORS ............................ 45 SELECTED RECENT WORLD BANK PUBLICATIONS ON JORDAN .................................................... 47 LIST OF FIGURES FIGURE 1. Growth remains at new plateau .................................................................................................. 9 FIGURE 2. Fifth month of consecutive quarterly slowdown in s.a. terms .................................................... 9 FIGURE 3. Industry main drag on supply-side growth.................................................................................. 9 FIGURE 4. Overall mining and quarrying index slower in 2016 with pick-up in July and August ................. 9 FIGURE 5. Output gap is negative and widening since 2013...................................................................... 10 FIGURE 6. Output gap in Q1 2016 is the lowest since Q4 2012 ............................................................... 10 FIGURE 7. Tourist arrivals and receipts lag 2015... .................................................................................... 11 FIGURE 8. …with construction indicators mixed . ...................................................................................... 11 FIGURE 9. Net exports and private demand fuel demand-side growth in Q2 and Q1 2016 respectively .. 11 FIGURE 10. Unemployment reaches historical high… ................................................................................. 13 FIGURE 11. …with Irbid and Maan the most affected .................................................................................. 13 FIGURE 12. Despite positive growth rates, unemployment rate is on the rise ............................................. 14 FIGURE 13. …. and total job creation on the decline ................................................................................... 14 FIGURE 14. The fiscal deficit is improving thanks to new measures adopted............................................... 15 FIGURE 15. …while the debt-to-GDP ratio expected to increase again in 2016 ........................................... 15 FIGURE 16. Lower energy imports drive the narrowing of the trade-in-goods deficits… .............................. 17 2 | Table of Contents JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY FIGURE 17. :… as domestic exports continue to be negatively impacted by route closures ......................... 17 FIGURE 18. Current account widening due to reduced current transfers ..................................................... 17 FIGURE 19. :…with these pressures resulting in lower reserves .................................................................. 17 FIGURE 20. Headline inflation remains in the negative due to food and fuel prices… .................................. 18 FIGURE 21. :…while core inflation is driven up by rents and tobacco and cigarettes prices ........................ 18 FIGURE 22. While nominal rates remain broadly flat… ................................................................................ 19 FIGURE 23. :…commercial lending to the private sector has been growing at a faster rate in 2016 ............. 19 FIGURE 24. Stock exchange index continues to lose momentum ................................................................ 19 FIGURE 25. Dollarization slightly higher than 2015 average. ....................................................................... 19 FIGURE 26. Results of Jordan’s Performance on International Learning Assessments .................................. 24 FIGURE 27. Programme for International Student Assessment (PISA) 2012 Equity Profile ........................... 24 FIGURE 28. Correlation between GDP per capita and government spending on primary education as a share of GDP, 2014 ................................................................................................................................................ 27 FIGURE 29. Correlation between GDP per capita and government spending on secondary education as a share of GDP, 2014....................................................................................................................................... 27 FIGURE 30. Number of Ministry of Education Teachers, 2001-13 ............................................................... 29 FIGURE 31. Real GDP per capita: Jordan vs Synthetic Jordan....................................................................... 38 LIST OF TABLES TABLE 1. Financial Soundness Indicators ................................................................................................. 20 TABLE 2. Gross Enrolment Ratios for Jordan and Comparators, 2012-13 ................................................ 23 TABLE 3. Ministry of Education Expenditures (as share of GDP) and Total Education Expenditures (2008-13)26 TABLE 4. Total Recurrent Spending by Budget Entity (2013) .................................................................... 28 TABLE 5. Unit Cost, Current Expenditure (current JDs) ........................................................................... 28 TABLE 6. Main components of education sector staff compensation, 2013 ............................................. 29 TABLE 7. Country Weights in the Synthetic Jordan .................................................................................. 38 TABLE 8. Averages of GDP per capita Characteristics Between 1990-2010 (Percent of GDP, unless stated otherwise) ................................................................................................................................................. 38 TABLE 9. DiD Estimates ........................................................................................................................... 39 TABLE 10. Selected Economic Indicators ................................................................................................... 44 LIST OF BOXES BOX 1. Potential Output Gap Analysis .................................................................................................. 10 BOX 2. New Economic Reform Package ............................................................................................... 12 BOX 3. A Closer Scrutiny on Job Creation in Jordan between 2007 and 2014 ...................................... 14 LIST OF KEY ABBREVIATIONS USED bps: Basis points H1, H2: First half of the year, second half of the year. 3mma: Three-months moving average pp: Percentage points Q1 (Q2, Q3, Q4): First (second, third, fourth) quarter of the year qoq: Quarter-on-quarter sa: Seasonally adjusted saar: Seasonally adjusted, annual rate yoy: Year-on-year lhs, rhs: Left hand side, right hand side (for axis of figures) ESSRP: The Emergency Services and Social Resilience Program Table of Contents | 3 THE WORLD BANK EXECUTIVE SUMMARY i. Jordan’s economic growth has been as the output gap further widens. Prices (CPI) subdued in the last year as spillovers from regional contracted by 1.1 percent on a period average (p.a.) instability take a toll. Jordan has been managing basis for the first nine months of 2016 (9M-2016). spillovers from the Syrian crisis including closure of This was driven by prices of food, transport and fuel. trade routes with Iraq and Syria and hosting more Core inflation (excluding food and fuel) stabilized than 656,000 registered Syrian refugees with UNCHR at 2.0 percent p.a. over the same period. Monetary with an estimated 1.3 million Syrians in Jordan as policy action has been unchanged since the last rate per the census. While the Jordanian economy has cuts in July 2015. held up with growth generated from a number of sectors, it has been losing momentum. Growth of iv. Jordan's public finances improved in 2.1 percent (yoy) in the first half of 2016 (H1-2016) the first eight months of 2016 (8M-2016) as new slightly declined compared to 2.2 percent in H1- measures kick-in yet debt remains elevated. 2015. ‘Finance and insurance services’, ‘transport The fiscal deficit narrowed by 33 percent in 8M- storage and communications’, and ‘electricity and 2016 yoy. A number of new fiscal measures were water’ were the largest contributors to growth introduced in July 2016 to address the fiscal that half; while ‘mining and quarrying’ was a drag. position. While the national electricity company The government has signaled that the economy has achieved cost recovery – currently aided by is a priority for Jordan by approving a number of low international oil prices, the Water Authority initiatives to stimulate growth, including measures of Jordan (WAJ) saw its deficit widen. WAJ’s recommended by the Economic Policy Council government-guaranteed borrowing adds pressure established by the King. Growth is expected to slow to Jordan’s already-high debt. The World Bank’s for the second year running to 2.3 percent in 2016 Programmatic Energy and Water Sector Reforms from 2.4 percent in 2015. Development Policy Loan supports improving the financial viability and increasing efficiency gains in ii. Spare capacity in the economy is widening both sectors. Additionally, a three-year US$ 723 as reflected in ever-higher unemployment rates. million arrangement under the IMF’s Extended Unemployment reached a high of 15.9 percent Fund Facility approved in August 2016 focuses on in Q3-2016 with over one third (36.7 percent) of fiscal consolidation and aims for a reduction of the youth unemployed. With signs of social pressures gross debt-to-GDP ratio to 77 percent by 2021 building, the government announced an 8-point plan from 93.4 percent end-2015. The IMF program also to address unemployment including allocating funds highlights a structural reform agenda to stimulate for entrepreneurial projects by youth. In parallel, the growth. The agreement is expected to unlock grants European Union (EU) has relaxed its Rule of Origin and concessional financing for Jordan in line with (ROO) requirements to Jordan for specific product commitments made under the Jordan Compact. categories for 10 years. This is expected to spur investment in Jordan, job creation for both Jordanians v. Pressures abound on the current account and Syrian refugees, and exports to the EU. due to slower tourism and remittances, closed land routes and pricing pressures on potash iii. Prices continue to recede as international exports. As a result, travel receipts contracted by 1.2 oil prices remain below the 2015 average and percent 9M-2016 yoy while total exports of goods 4 | Executive Summary JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY fell by 3.8 percent 8M-2016 yoy; with domestic exports to Iraq down 40.6 percent. While continued low oil prices compared to 8M-2015 help reduce Jordan’s import bill, pressure on the current account stems in part from a reduction in remittances (-4.0 percent 9M-2016 yoy). Such pressures have led to a widening of the current account to 12.7 percent of GDP (H1-2016) and have affected Jordan’s gross international reserves which decreased by 11.1 percent to US$12.6 billion (7.9 months of imports) by end-September 2016 compared to end-2015. vi. The outlook is subject to downside risks. Compared to the region, Jordan’s growth forecast of 2.3 percent for 2016 is in line with the average growth rate for the Middle East and North Africa. However, higher frequency of security incidents are materializing around Jordan and could further depress consumer and investor confidence. Containing the fiscal deficit and implementing the new IMF program will be challenging as some adjustment measures could be considered socially sensitive. In parallel, the implementation of planned reforms to improve the functioning of the labor market, improve the investment climate and unlock access to finance which are vital to stimulate economic activity, and improve welfare. Finally, Jordan’s external position would face further pressures if expected grants and concessional financing do not materialize and grants are not sustained and increased. 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Higher frequency of security incidents in the previous Parliament), five above the number is materializing around Jordan exposing its stipulated under the woman’s quota introduced in vulnerabilities in addition to social discontent. the new electoral law. Overall, two-thirds of new Security incidents at the Jordan-Syria border Parliamentary members were voted for the first time. have been on a rise in 2016, with northern and Observers from the Parliamentary Assembly of the northeastern borders declared as a military zone. Council of Europe commended the Internal Election Land routes to Syria and Iraq remain closed (since Commission for transparent and professional April and July 2015, respectively) despite high- elections while suggesting some improvements level discussion for the re-opening of the latter. to the electoral process. A new government was A number of protests have manifested including announced on 28 September 2016 comprising 29 those opposing the signing of a gas deal between ministers of which 22 unchanged from the previous NEPCO and Noble Energy. Controversy has also government and the introduction of three new arisen in relation to proposed curriculum reform portfolios (ministers of state for investment affairs, with religious conservatives accusing the reform as economic affairs and foreign affairs). fulfilling a secularist agenda. The reforms are part of a larger effort in the education sector in line with Vision 2025 and the recently launched National Committee for Human Resources Development. Output and Demand 2. Parliamentary elections proceeded largely smoothly with preliminary results indicating some 3. While the Jordanian economy has held new elements, with 36 percent voter turnout. The up, it has been losing momentum and is diverging 20 September 2016 Parliamentary elections had further from its potential. Growth of 2.3 percent elements of a proportional representation system in the first quarter of 2016 (Q1-2016) was an under a new law that moved away from the one- improvement compared to 2.0 percent in Q1- man-vote system that had been in place since 1994. 2015. However, Q2-2016 growth slowed down to Close to 1.5 million Jordanians voted out of more 1.9 percent (compared to 2.4 percent in Q2-2015) than 6 million citizens, the highest number to go to such that the first half results for 2016 (H1-2016) the polls in Jordan’s history, with forty percent of of 2.1 percent average growth are more or less flat voters under the age of 40. The Islamic Action Front to the 2.2 percent H1-2015 growth. This is also in (the political arm of the banned Muslim Brotherhood) line with the growth plateau seen since 2010 with who emerged from boycotting the previous two average annual growth reduced at an average of 2.6 elections made gains aided by its alliance with non- percent compared to 6.5 percent for 2000-2009 Islamists and Christian candidates in the National (Figure 1). This plateau is impacted by a number of Coalition for Reform. They won 15 (compared to exogenous shocks that have affected Jordan since an expected 20-30) out of the 130 Parliamentary 2010, including spillovers of the Arab Spring such seats. In contrast, a number of traditional Members as closing of trade routes with Iraq and Syria, and of Parliament were not elected to the Lower House. the influx of Syrian refugees. Arab Spring spillovers Some secular voices emerged and 20 women were are estimated to have affected Jordan economic elected to Parliament (compared to 18/150 women performance negatively, reducing GDP/capita by 8 | Recent Economic and Policy Developments JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY GDP Growth 2000-2016 Supply Side Contribution to Real GDP Growth (yoy) Net Taxes On Product Services Industry Agriculture GDP 10 4.0 9 3.5 8 3.0 Percent (%) 7 2.5 6 Period Averages : 5 2000-2009:6.5% 2.0 Percent (%) Period Averages : 4 1.5 2010-2016:2.6% 3 1.0 2 0.5 1 0.0 0 -0.5 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2 2016p 2000 2005 2008 2011 2014 2001 2002 2003 2004 2006 2007 2009 2010 2012 2013 2015 -1.0 2010 2011 2012 2013 2014 2015 2016 -1.5 FIGURE 1. Growth remains at new plateau FIGURE 3. Industry main drag on supply-side growth… Source: Department of Statistics and World Bank staff calculations Source: Department of Statistics and World Bank calculations Annualized Qoq Seasonally Adjusted GDP Growth Rate Mining, Quarrying and Manufacturing Percent 2.5 Manufacturing Mining and Quarrying Mining of chemical and fertilizer minerals 2 160 140 1.5 120 100 Index 1 80 0.5 60 40 0 20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 2012 2013 2014 2015 2016 0 March April June September October November March April June December August August January February May July January February May July -0.5 Annualized sa GDP growth rate -1 2015 2016 FIGURE 2. Fifth month of consecutive quarterly FIGURE 4. Overall mining and quarrying index slower in slowdown in s.a. terms 2016 with pick-up in July and August Source: Department of Statistics and World Bank staff calculations Source: Central Bank of Jordan and World Bank staff calculations US$ 901 in 2015 alone.1 Q1-2016 was the fourth ‘mining and quarrying’ were two sectors detracting quarter in a row to slow-down on a seasonally from growth by 0.2 percentage points and 0.3 adjusted basis although some pick-up is apparent percentage points respectively in H1-2016 (Figure for Q2-2016 (Figure 2). It is estimated that Jordan’s 3). On a quarterly basis, Q2-2016 saw growth of output gap as a share of its potential output for Q1- 1.9 percent compared to 2.4 percent in Q2-2015. 2016 was negative 0.58 percent on average (Box 1). Mining and quarrying notably saw negative growth of 26.7 percent in Q2-2016 yoy. This reflects lower 4. Growth was moderate yet fueled by international demand for Jordan’s potash which has a number of sectors, with only two sectors been negatively affected by international pricing being drags on growth in H1-2016. ‘Finance pressures. It also reflects the 12.6 percent drop in and insurance services’, ‘transport, storage and the average mining and quarrying component of communications’, and ‘electricity and water’ were the industrial price index for the first 8 months of the largest contributors to growth contributing 2016 compared to the same period in 2015 despite 0.5 percentage points, 0.5 percentage points and improvement in July and August (Figure 4). While 0.3 percentage points to growth, respectively. ‘restaurants and hotels’ declined by 2.7 percent In contrast, ‘imputed bank service charge’ and in Q2-2016 yoy, the tourism-related sector had a neutral contribution to growth. Tourist arrivals saw 1 Kindly refer to this issue’s Special Focus: The Economic a 6.8 percent contraction in Q1-2016 yoy mitigating Impact of the Arab Spring on Jordan. Recent Economic and Policy Developments | 9 THE WORLD BANK BOX 1. Potential Output Gap Analysis. Policy makers often refer to the potential output gap as a proxy of the economy’s performance or lack thereof. The potential output gap depicts how far off the economy is from the output it would have generated had it operated with its maximum capacity (i.e. fully employed factors of production). There are several techniques referred to in the literature for estimating potential output gap. Two estimation techniques with variations are employed in the following for a holistic and robust approach. The Hodrick-Prescott (HP) filter, a de-trending statistical method, is employed using three standard smoothing parameters (1600, 1000, 500). The output gap for Jordan is estimated on annual data over the sample period 1975-2018 as well as on quarterly data over the sample period Q1-1992 – Q4-2016. Data post Q2-2016 is obtained from World Bank staff projections. Annual output gap is also estimated using a Production Function model (as of 1990), which is a structural method incorporating economic theory that relates output to total factor productivity and production inputs. The economy has been operating below its potential since 2013 when the output gap turned negative for the first time since 2005. Results show that the economy was suffering from a negative and widening output gap from the mid-1990s until mid-2000s. In 2005, the economy embarked on a period of high growth during which it operated above potential recording a positive output gap until 2009 when it reached +5.27 percent (on average across the four estimation techniques employed) of potential output (Figure 5). Since then, the output gap has been narrowing and even became negative in 2013. The annual output gap estimates for 2013 have an average of -0.03 percent across the four different methods, after being +0.65 percent in 2012. The annual output gap further widened to reach an average of -1.05 percent of potential output in 2015 and is forecasted to continue deteriorating to reach -1.74 percent in 2016. The numerous estimation methods employed yield similar trajectories for the potential output gap, particularly when applied with quarterly data. The magnitudes of the quarterly output gap estimates from the different HP filters* are very close (Figure 6). This diversity in the use of estimation techniques provides a wide scope for robustness and cross-checking that further validates the estimation process. The output gap estimates from the HP filter with the three different smoothing parameters are negative in all quarters of 2013. This is in line with the annual data. In the first quarter of 2016, output gap reached an average of -0.58 percent of potential output, which was the lowest recorded since Q4-2012. Although still negative, the output gap showed a modest pickup in Q2-2016 to reach -0.38 percent of potential output. The gap is expected to turn positive by the third quarter of 2016 to reach +0.13 percent of potential output. Despite the uncertainty in estimating a country’s output gap, the various estimates unanimously show that the Jordanian economy is operating below its potential. This result is in line with other indicators that reflect idle capacity such as high unemployment rates, persistent deflation, among others. Output Gap (percent of potential output) Output Gap (percent of potential output) Percent Percent 5.00 8.00 4.00 3.00 5.00 2.00 2.00 1.00 -1.00 p 2016p 2016p 2017p p 2017p 2018p 2018p 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0.00 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3p -4.00 -1.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 016 2016 -7.00 -2.00 -3.00 -10.00 Output gap as a % of potential output, Production Function Output gap as a % of potential output, HP filter, ƪ=100 -4.00 Output gap as a % of potential output, HP filter, ƪ=1600 -13.00 Output gap as a % of potential output, HP filter, ƪ=6.25 Output gap as a % of potential output, HP filter, ƪ=1000 -16.00 Output gap as a % of potential output, HP filter, ƪ=400 Output gap as a % of potential output, HP filter, ƪ=500 FIGURE 5. Output gap is negative and widening since FIGURE 6. Output gap in Q1 2016 is the lowest since Q4 2013. 2012. Source: Department of Statistics and World Bank staff calculations Source: Department of Statistics and World Bank staff calculations *The production function estimation approach was not employed with quarterly data. 10 | Recent Economic and Policy Developments JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Tourism (Jan-Sep) Demand Side Contribution to Real GDP Growth (yoy) Tourism Receipts (USD Million) Tourist Arrivals (thousands) Private Demand Net Exports Public Consumption Public Investment Tourism Receipts (yoy growth, %), rhs Tourist Arrivals (yoy growth, %), rhs GDP Growth, rhs 6000 25 Percent Percent 20 3.8 20 17.5 3.5 5000 15 15 3.3 12.5 3.0 4000 10 10 2.8 7.5 2.5 5 5 2.3 3000 2.5 2.0 0 1.8 0 1.5 2000 -5 -2.5 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2 1.3 -5 1.0 -10 1000 -7.5 2011 2012 2013 2014 2015 2016 0.8 -15 -10 0.5 -12.5 0.3 0 -20 -15 0.0 2011 2012 2013 2014 2015 2016 FIGURE 9. Net exports and private demand fuel demand- FIGURE 7. Tourist arrivals and receipts lag 2015… side growth in Q2 and Q1 2016 respectively Source: Ministry of Tourism, Central Bank of Jordan and World Bank Source: World Bank staff calculations Construction Sector (Jan-July) of a narrower trade deficit (Figure 9). The deficit narrowed by an estimated 14.5 percent in Q2-2016 Area Number of Permits, rhs yoy as a result of an 8.1 percent contraction in imports 10,000 25,000 that offset the 4.1 percent contraction in exports in Thousands of Square Meters 9,000 8,000 20,000 Q2-2016 yoy (in real terms). Public consumption 7,000 6,000 15,000 contributed an estimated 1.3 percentage points Number 5,000 to growth. Meanwhile private demand and public 4,000 10,000 3,000 investment detracted 2.6 and 0.3 percentage points 2,000 5,000 1,000 to growth respectively that quarter. However, public 0 2010 2011 2012 2013 2014 2015 2016 0 and private investment are expected to improve following the bilateral agreement between Jordan FIGURE 8. …with construction indicators mixed and Saudi Arabia for investment purposes in the Hashemite Kingdom, crystalized in the related Source: Central Bank of Jordan and World Bank staff calculations Jordan Investment Fund Law. somewhat to a 3.4 percent contraction in the first 6. The government is introducing new 7 months of 2016 (7M-2016), yoy (Figure 7). reforms to stimulate the economy such as Construction which recorded 1.1 percent growth in those recommended by the newly established Q2-2016 yoy (also neutral contribution to growth Economic Policy Council (EPC). In June 2016, in Q2-2016) has seen a negligible improvement the King established the EPC to identify measures in the number of permits issued and a 5.9 percent to activate the economy both related to quick fixes contraction in the area for 7M-2016 yoy (Figure 8). with direct impact and to longer term structural policies. The establishment of the EPC is perceived 5. It is estimated that public consumption as a serious signal to treat the economy’s challenges stimulated growth from the demand side, as a priority. The 15-member council has 8 sub- followed by private demand in H1-2016. Public committees including related to the business consumption is estimated to have contributed 1.8 environment, startups, laws and regulations, tax percentage points to growth in H1-2016 followed by reform, small and medium enterprises. The EPC’s 0.5 pp by private demand (private consumption and first recommendations were endorsed by the private investment). On a quarterly basis however, government in September 2016 (Refer to Box 2). it was net exports that was the larger contributor to growth from the demand side in Q2-2016 with an estimated 3.6 percentage points to growth as a result Recent Economic and Policy Developments | 11 THE WORLD BANK Box 2. New Economic Reform Package. The Jordanian government adopted a new economic reform package in September 2016. Cabinet endorsed the first set of recommendations proposed by the Economic Policy Council to help the government in accelerating growth. The 38 measures, which were effective upon approval, fall into nine categories as presented below. Startup Financing SME Financing - Setup a $100m venture capital fund with the World Bank - Endorse Movable Assets Law (2016) — activate the existing (WB) and the Ministry of Planning and International law through issuing by-law and withdraw the draft law from Cooperation (MoPIC) in coordination with the Central Bank parliament for review. of Jordan (CBJ), $50m by WB and CBJ to secure additional - Allow banks to give out direct loans to SMEs under CBJ’s $50m in 2016. (Withdrawal of WB loan will be in beginning refinancing program (immediately) of 2017) - Allocate 15 percent of the soft loans extended by international - CBJ to increase the Jordan Loan Guarantee Corporation and regional financial institutions to SME’s startups (CBJ/ (JLGC) JD50m start-up loan guarantee program established 2016) in 2016 to JD100m in 2017 Export and Growth Financing Governorate Financing - Allocate JD100m to JLGC for export guarantee program - Decrease the CBJ’s refinancing program rate from 1.75 (CBJ/ 2016) percent to 1 percent for projects located outside Amman - Banking sector to setup private equity fund of JD150m (immediately) JD110m from commercial banks and JD40m from Islamic - Expand the maturity period of the CBJ’s refinancing program Banks (Banks, CBJ/ 2016) (immediately) - Raise allowable guarantee ceiling to JD1m (from JD550,000) for service and industrial loans (MoPIC, JLGC/ 2016) Capital Market Financial Instruments - Privatize ASE — Public shareholding company (Jordan - Expand the “Issuing of Savings Bonds” campaign to include Securities Commission (JSC)/2017) Jordanian expats as well as locals (Ministry of Finance (MoF), - Enable e-trading on ASE (JSC/2017) CBJ/2016) - Amend JSC and companies laws to grant securities - Expand the “Issuing of Islamic Sukuk” target market to commission more discretion in issuing instructions to set include individuals (MoF, CBJ/2016) policy (JSC/2017) - Enforce corporate governance stipulated in laws on public Microfinance and insurance (cont.) shareholding companies (JSC/2017) - Allow for tax deductions on investments in startups. - Enact Exchange Traded Fund (ETF) and Mutual Funds Introduce an article to Income Tax Law (2014) that allows for (JSC/2017) tax deductions on investments in startups of three-year-old - Allow for “virtual office” registration. Amend Companies Law Microfinance and insurance to allow for “virtual office” registration - Furnish banks’ lending and loan guarantees with microfinance - Create a flat low rate for customs and goods and services tax institutions that successfully complete licensing process as while reconsidering exemptions per CBJ regulations (banks, CBJ/2017) - Align resource allocation with international best practice on - Incentivize mergers of insurance and microfinance compliance vs auditing (5-10 percent) , as well as creating companies (CBJ/2017) specializations within tax department - Enable general partners/limited partners — Investment - Limit tax evasion Limited Partnership (ILP) legal setup. Introduce Investment - Adopt receipt-based system Limited Partnership (ILP) legal structure in companies - Automate and link services through building an e-database - Allow for enforceability of shareholders agreements — except - Enforce imprisonment for tax evasion for PLCs. Introduce an article in companies law to allow for - Encourage payment of outstanding tax dues through adopting annexation and enforceability of shareholders agreement incentive settlement program. - Remove Goodwill Tax. Amend article (3-A7) of Income Tax Law (2014) to remove Goodwill Tax Overarching economic legislative framework - Ensure economic rights of private sector interaction with Lower cost of compliance for SMEs: government are clear and met - Allow semi-annual reporting - Exempt Social Security Investment Fund and Securities - Cash-based accounting (vs accrual), for applicable sectors Commission from Civil Service by-law (hiring procedures) - Automate legal case assignment processes within judicial - Re-engineer, digitize and outsource (when possible) business system (assign commercial cases to specialized judges) related processes. Project to commence with top 10 business - Train employees on proper use of judicial police license (law related to government processes enforcement authority) - Reach out to Gulf Cooperation Council to secure - Facilitate company insolvency accreditation and recognition of Jordanian professional - Amend legal notification process (electronic) service qualifications (ex: auditing, accounting, engineering - Create tax clearing house and architecture) - Enable low-cost carriers (LCCs). Develop Marka Airport through private sector BOT participation to become Amman’s primary airport for LCCs. Source: “Cabinet adopts economic reform package proposed by EPC”, Jordan Times, 2016 12 | Recent Economic and Policy Developments JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Jordan Labor Market Dynamics (sa) Unemployment by Governorate in the First Three Quarters of 2016 Employment Rate (ER) Labour Force Participation Rate (LFPR) Unemployment Rate (UR), rhs Aqaba 17.1% 42 16 Maan 17.7% Tafiela 16.0% 40 15 Karak 14.9% 38 14 Ajloun 17.6% Percent (%) Percent (%) Jarash 15.4% 36 13 Mafraq 16.5% 34 12 Irbid 17.7% 32 11 Madaba 13.8% Zarqa 14.6% 30 10 Balqa Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Aman 12.9% 2008 2009 2010 2011 2012 2013 2014 2015 2016 FIGURE 10. Unemployment reaches historical high… FIGURE 11. …with Irbid and Maan the most affected Source: Department of Statistics and World Bank staff calculations Source: Department of Statistics and World Bank staff calculations 8. The Government has been focused on job Labor and Employment creation for Jordanians as well as Syrian refugees as part of its development plans and agreement with 7. Structurally-high unemployment reached the international donor community. With signs of a historical high in the first three quarters of 2016 social pressures building, the government announced averaging 15.1percent. This constitutes a worsening an 8-point plan to address unemployment including by 2.2 percentage points compared to the same allocating funds for entrepreneurial projects by youth. period of 2015, with the female unemployment The government has also been supporting a number rate of 23.9 percent substantially higher than that of regional development packages to stimulate job- of men (13.2 percent). The youth unemployment creation including in Ajloun, Madaba, Zarqa, Maan rate remains elevated averaging 35.5 percent in the and Aqaba with a focus on development programs, first three quarters of 2016, the highest since Q3- infrastructure support and funds to support Small 2013. The employment rate has exhibited a sharp and Medium-sized Enterprises (SMEs). In Madaba downward trend since 2009 to reach an average for example, government spending on development of 30.7 percent in the first three quarters of 2016 programs reached JD 58.3 million in 2016 by (Figure 10). The labor force participation rate (LFPR) end-August with development projects in Zarqa remains low and decreasing at 36.2 percent during supported by JD 115 million, JD 112 million for the first three quarters of 2016 (compared to 37.1 Maan and JD 244 million in Aqaba. In parallel, part percent for the same period of 2015), with female of the Jordan Compact aims to turn the refugee crisis participation at 13.1 percent against 59.0 percent for into a development opportunity which is expected to males. (Box 3 looks at unemployment rates and job foster some job creation for Jordanians and Syrians. creation more closely using data available between This is based on new market opportunities related 2007 and 2014). Geographically, Irbid and Maan to the relaxation of the European Union’s (EU) rules registered the highest unemployment rate over the of origin, which entered into effect in July 2016 for first three quarters of 2016 at 17.7 percent each an initial period of 10 years. This agreement allows compared to 12.9 percent registered in Amman exports from 18 special economic zones (SEZs) in (Figure 11). All governorates suffered from increasing Jordan to access the EU for a specified number of unemployment rates between the first three quarters product lines such that at least 15 percent of labor in 2015 and the first three quarters 2016 except for is from Syrian refugees. With a number of reforms Madaba whereby the average unemployment rate aimed at improving the labor market, investment registered there declined by 0.1 percentage points climate, and investment promotion, new investments to reach 13.8 percent. are expected, particularly from investors already familiar with Jordan. Recent Economic and Policy Developments | 13 THE WORLD BANK Box 3. A Closer Scrutiny on Job Creation in Jordan between 2007 and 2014. Unemployment rates remain elevated despite positive growth in Jordan. While real GDP grew by 29.2 percent between 2007 and 2014, unemployment only dropped slightly from 13.1 percent in 2007 to 11.9 percent in 2014 (Figure 12). This is in line with Jordan’s low aggregate employment-growth elasticity, previously estimated at 0.53 between 2000 and 2009.* Even though the number of unemployed Jordanians dropped from 8,008 in 2007 to 5,511 in 2014, it was offset by a larger drop in the Jordanian labor force. In fact, there were 61,043 economically active Jordanians in 2007 compared to 46,348 in 2014. The contraction in the Jordanian labor force is one explanation for the persistently high unemployment rates. While the Jordanian economy has been registering positive growth rates, this growth has not been inclusive in terms of job creation across sectors. Total jobs created dropped by 29 percent between 2007 and 2014 (-4.3 percent average annual growth rate) (Figure 13). In absolute terms, there were 70,356 net jobs created in 2007 versus 49,935 net jobs created in 2014. Out of the total jobs lost between 2007 and 2014, 16.1, 21.1 and 30.1 percent corresponded to sectors covering education; real estate, renting and business activities; and private households with employed persons, respectively. On the other hand, mining and quarrying and hotels and restaurants contributed positively to total job creation during the period of 2007-2014. A closer scrutiny of the data shows that job creation was worse in the private sector than in the public sector. Job creation in the private sector shrank at an average annual growth rate of -4.54 percent between 2007 and 2014 compared to -0.37 percent in the public sector. In fact, out of the total jobs lost between 2007 and 2014, 75.8 percent stemmed from the private sector. Job creation for Jordanians was slower than that for non-Jordanian workers in the Kingdom especially for those with a bachelor’s degree and above. Out of the 20,421 jobs lost between 2007 and 2014, 66.1 percent were occupied by Jordanians versus 33.9 percent by non-Jordanians. Moreover, out of the Jordanians who lost their jobs, 37.8 percent had bachelor degrees and above and 25.4 percent had secondary level education. However, job prospects improved for Jordanians with basic education only. This depicts shifts in the labor market dynamics in Jordan. Moreover, data is not that stark with non-Jordanians as all education categories suffer from job losses almost proportionally between 2007 and 2014. More noticeably, 15.1 percent of the non-Jordanians who lost their job had elementary level education and 13.1 percent had secondary level education. However, only 2.8 percent of bachelor holders lost their jobs among the non-Jordanians. Real GDP Growth vs. Unemployment Rate Annual Real GDP vs. Total Job Creation Real GDP Growth (yoy, sa) Unemployment Rate (sa), rhs Annual Real GDP Total Net Jobs, rhs Percent Percent 9 16 JD Million 8 12,000 90,000 15 7 80,000 14 10,000 6 70,000 5 13 8,000 60,000 50,000 4 12 6,000 40,000 3 4,000 30,000 2 11 20,000 2,000 1 10 10,000 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 FIGURE 12. Despite positive growth rates, unemployment FIGURE 13. ... and total job creation on the decline ... rate is on the rise ... Source: Department of Statistics and World Bank staff calculations Source: Department of Statistics and World Bank staff calculations * World Bank (2012). Hashemite Kingdom of Jordan: 2012 Development Policy Review, Washington DC. 9. The government is delivering on its pledge to obtain work permits for free from employers in to facilitate the issuance of work permits for Syrian the informal sector. This measure was expected to refugees, although take-up has been slower than regularize the employment of Syrian refugees and expected. In April 2016, the Government of Jordan help them access legal employment as few met introduced a three-month period for Syrian refugees requirements to be afforded a work permit before 14 | Recent Economic and Policy Developments JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Fiscal Deficit (Excluding Grants, % of GDP) Jordan Debt to GDP Ratio (1998 - 2016) Domestic Revenues Budget Balance (excl. grants), rhs External Internal Total Total Expenditures Budget Balance (incl. grants), rhs 45 20 120 40 15 100 35 10 80 Percent (%) 30 Percent Percent 25 5 60 20 0 40 15 -5 10 20 5 -10 0 2016p 0 -15 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p FIGURE 14. The fiscal deficit is improving thanks to new FIGURE 15. …while the debt-to-GDP ratio expected to measures adopted… increase again in 2016 Source: Ministry of Finance and World Bank staff calculations Source: Ministry of Finance and World Bank staff calculations 2016. At 13,000 work permits issued by this time, larger improvement with the fiscal (primary) deficit take-up of work permits by Syrian refugees was registering improvements of 1.00 pp (0.81 pp), with slower than expected and the waiver was extended a interest payments 0.2 pp lower (Figure 14). The further three months. A number of concerns plague improvement in the fiscal balance was led by a pick- Syrian refugees from seeking work permits. First, up in domestic revenues mostly due to higher non-tax most Syrian refugees work by taking on casual and revenues followed by tax revenues driven by higher informal jobs which can no longer be possible once collected taxes on income and profits. The revenue a permit is obtained. Moreover, having a permit pick-up also reflects the effects of a number of fiscal necessitates an employer willing to support the measures that were introduced by the authorities contract which is not usually the case in the sectors in as part of an agreement with the IMF that were which Syrian refugees are mostly working, namely: effective as of July 1st, 2016 and were introduced to construction, hospitality, cleaning and agriculture. improve the fiscal position. Such measures included Second, permits require workers to be legally tied to increasing the prices of cigarettes, the tax on alcohol, their employers. Third, from a monetary perspective, raising the transfer fees on car sales, the removal of some refugees fear the loss of the financial aid they 2015 Goods and Sales Tax exemptions, reducing tax are receiving from UNHCR upon obtaining a work exemptions on imported used cars.2 permit, despite assurances from UNHCR that those eligible for assistance would be not be disqualified 11. Despite improvement in the fiscal balance, from receiving it. Syrian refugees also fear potential gross public debt continues to rise with pressures renewal fees that they would be subject to annually. stemming from the Water Authority of Jordan (WAJ) whose debt is government-guaranteed. By the end of August 2016, debt registered $36.2 billion (93.9 percent of adjusted and forecasted GDP) compared to US$ 35.1 billion by end of 2015 Fiscal Policy (93.4 percent of GDP) (Figure 15). WAJ borrowing has added to the vulnerability towards debt levels 10. The government’s fiscal position has improved in the first eight months of the year as 2 Permanent measures adopted: (i) An increase in: a. cigarettes new measures kick-in. The fiscal (primary) deficit, prices by JD 0.05/packet; b. cigarettes prices by JD 0.10/packet in including grants, improved by 0.75 (0.56) percent of Aqaba zone; c. diesel, kerosene and gasoline prices by JD 0.025/ liter; d. the special sales tax on wines and spirits; (ii) The removal GDP (pp) to reach 1.34 percent of forecasted GDP of 2015 GST exemptions including on clothes, shoes, watches, during 8M-2016, despite a 0.26 pp reduction in jewelry; (iii) adding an extra fee for “transfer of titles” on used vehicles; and (iv) reducing the depreciation allowance on used grants. Excluding grants, fiscal aggregates reported a imported cars. Recent Economic and Policy Developments | 15 THE WORLD BANK in Jordan given pressures on its cost recovery stability and fiscal consolidation with the aim to stemming from higher operating costs providing reduce debt-to-GDP ratio to a more sustainable for Syrian refugees, and capital expenditure costs 77 percent by 2021. The Program is focused on that were previously off-balance sheet. Having broadening the tax base, addressing tax incentives, achieved cost recovery in 2015, the National Electric income taxation, improving tax administration and Power Company of Jordan (NEPCO) is expected to monitoring growth in spending. In addition, the EFF achieve a profit in 2016 and no longer contributing provides a broader structural reform agenda that is new debt. The World Bank’s Programmatic Energy intended to stimulate inclusive growth particularly and Water Sector Reforms Development Policy as related to boosting the business environment, Loan supports improving the financial viability and strengthening the financial sector, improving access increasing efficiency gains in both water and energy to finance, and supporting the water and energy sectors. With respect to Jordan’s debt composition, sectors.3 the share of domestic currency debt increased from 62.3 percent at end-2015 to 63.2 percent by end- August 2016 as Jordan diversifies its local-currency denominated debt instrument mix. In addition to re-introducing 6-month Treasury bills, 2 and 3-year External Position Treasury bonds, and 5-year floating rate Treasury Bonds at limited sizes, Jordan introduced 10-year 13. Jordan’s trade-in-goods balance has Treasury Bonds in September 2016. A total of narrowed despite improvements in non-energy JD 910 million worth of 10-year Treasury Bonds imports and weaker exports, due to pricing were issued in September and October (up to 25 pressures on potash and route closures. The trade October) at a weighted average interest rate of 6.45 in goods deficit narrowed by 9.8 percent in 8M- percent for the last issue. Additionally, Jordan issued 2016 yoy, as the 3.8 percent total export decline was its inaugural Sukuk in May 2016 as financing for outweighed by a 7.6 percent reduction in imports NEPCO. The five-year JD 75 million issuance was priced at 3.5 percent and had a 2.7 coverage ratio. A 3 Structural benchmarks include: (i) Under fiscal framework second JD 34 million Sukuk was issued as a sovereign and management: to submit to Parliament a new tax exemptions framework to reduce GST exemptions, a new income tax law, and local currency Sukuk in October 2016 with a 3.3 a draft budget law for 2017 in line with program understandings coverage ratio. The Central Bank of Jordan issued and projections, an organic budget law; implement new income “Saving Bonds for Individuals”, the first government tax law, rationalize the GST and customs duty systems based on IMF technical assistance, comply with requirements of phase II of bonds for individuals, amounting to JD 28 million, the road map for International Public Sector Accounting Standards; aiming to provide individuals with secure long and (ii) debt management: public a public debt management strategy (by end-September 2016 and an update by end-June 2017), mid-term saving instruments with fixed returns at approve a plan to reorganize the Public Debt Directorate and an interest rate of 4.25 per cent for 5 years. On the finalize its reorganization by end-June 2017; (iii) water and foreign currency debt front, Jordan issued USD 1 energy sectors: public studies on cross-subsidization and options for price adjustments in response to oil price changes, adopt an billion worth of 10-year Eurobonds in October 2016 automatic electricity tariff adjustment mechanism with effective at 5.75 percent coupon and 5.8 percent yield, in implementation on 1 January 2017, submission to Cabinet and a transaction that was four times oversubscribed. publication on an updated action plan on reducing the water sector’s losses; (iv) financing sector and access to finance: implement a Finally, Jordan published a Medium-term Debt risk-based framework for offsite AML/CFT supervision for banks Management Strategy at the end of September 2016. and money exchange firms, submit to parliament amendments to the Deposit Insurance Corporate Law, amend and enact the Insolvency Law, enact the Secured Lending Law, publish a study 12. A year following the satisfactory completion assessing key issues and challenges to promote financial inclusion, of the IMF Stand-by Arrangement (SBA), the IMF amend the Insurance Law to allow for the transfer the supervision of the insurance sector to the Central Bank of Jordan and finalize Board approved an Extended Arrangement for the transfer; (v) business environment: submit to Parliament a draft Jordan under the Extended Fund Facility (EFF) Inspection Law, address shortcomings in the Investment-Window in August 2016. The three-year US$ 723 million procedures by automating and integrating the services provided by the Jordan Investment Commission. Source: IMF Jordan Staff Arrangement focuses on maintaining macroeconomic Report, September 2016. 16 | Recent Economic and Policy Developments JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Trade in Goods Balance until August H1 - Current Account Balance Imports Exports Current Transfers Income Account 5,000 Trade Deficit Energy Imports (rhs) Trade Balance Current Account Exports of Phosphates (rhs) Exports of Potash (rhs) 4,000 3,000 14.0 5.0 2,000 4.5 12.0 1,000 US$ million 4.0 10.0 3.5 0 3.0 -1,000 2009 2010 2011 2012 2013 2014 2015 2016 US$ bln US$ bln 8.0 2.5 6.0 -2,000 2.0 1.5 -3,000 4.0 1.0 -4,000 2.0 0.5 -5,000 0.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 -6,000 FIGURE 16. Lower energy imports drive the narrowing of FIGURE 18. Current account widening due to reduced the trade-in-goods deficits… current transfers… Source: Central Bank of Jordan and World Bank staff calculations Source: Central Bank of Jordan and World Bank staff calculations Exports: Jan - August Reserves as Months of Imports until September 2016 U.S.A. Saudi Arabia India Reserves, US$ mln Iraq Kuwait Syria Reserves as Months of Imports, rhs 16,000 12 700,000 600,000 14,000 10 500,000 12,000 8 US$ mln JD Thousand 400,000 10,000 6 300,000 8,000 4 200,000 6,000 2 100,000 4,000 - Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Jul-16 Apr-14 Apr-16 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 FIGURE 17. … as domestic exports continue to be FIGURE 19. …with these pressures resulting in lower negatively impacted by route closures reserves Source: Department of Statistics and World Bank staff calculations Source: Central Bank of Jordan and World Bank staff calculations (Figure 16). The decline in exports was driven by a 38.9 origin for industrial products applied to Jordan (Refer percent slump in potash exports. The potash industry to paragraph 8). With respect to imports, low oil was hit by global oversupply resulting in strong price prices and the exchange rate appreciation compared competition and high reserves in importing countries, to the Euro have put downward pressure on imports prompting Cabinet to discuss mitigating measures. by value but have benefited importers. In 8M-2016, Additionally, the closure of the borders to Iraq in July energy imports of goods were down 33.0 percent 2015 and Syria (which itself affected bilateral trade compared to the same period in 2015 with non- and transit trade to Lebanon, the European Union energy imports decreasing by 1.8 percent. and Turkey) has negatively affected trade increasing export time and cost. Domestic exports to Iraq and 14. Pressures on the current account and Syria dropped by 40.6 percent and 68.3 percent reserves stem from lower remittances and travel respectively in 8M-2016 yoy (Figure 17). Exports receipts. The current account widened by 3.3 continue on alternative trade routes (e.g., Kuwait). percentage points of GDP in H1-2016 yoy driven by While exports to Saudi Arabia have seen negative lower current transfers (including a 0.3 percentage growth of 10.1 percent in 8M-2016 yoy, a pick-up point of GDP (pp) reduction in remittances) and less in exports to Kuwait of 49.6 percent has more than service receipts (led by a 0.4 pp detraction in travel compensated. Exports to the EU are expected to be receipts) despite narrower trade in goods balance buoyed by a new arrangement of relaxed rules of and income account (Figure 18). Current account Recent Economic and Policy Developments | 17 THE WORLD BANK Headline and Core Inflation - yoy growth Drivers of Core Inflation 7 Headline Inflation Core Inflation 6 8 5 6 4 3 Percent 4 2 Percent (%) 1 2 0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 0 -1 Jan-13 Jun-13 Jan-14 Feb-13 Jan-15 Jan-16 Mar-13 Apr-13 May-13 Jul-13 Sep-13 Oct-13 Nov-13 Dec-13 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Sep-14 Oct-14 Nov-14 Dec-14 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Sep-16 Aug-13 Aug-16 Aug-14 -2 -2 Other Personal Effect Personal Care Education Home Maintenance Rents Clothing and Footwear Tobacco and Cigarettes Core Inflation growth -4 Communication FIGURE 20. Headline inflation remains in the negative FIGURE 21. …while core inflation is driven up by rents due to food and fuel prices… and tobacco and cigarettes prices Source: Department of Statistics and World Bank staff calculations Source: Department of Statistics and World Bank staff calculations components continue to reveal slower performance introduced due to fiscal measures implemented than in 2015 and reflect the impact of protractedly by the government. The cumulative growth of low oil prices on average on Jordan via the GCC. headline inflation as measured by the Consumer Remittances dropped by 4.0 percent in 9M-2016 Price Index for 9M-2016 yoy stands at negative compared to a 1.8 percent increase during the same 1.1 percent (Figure 20). The decline in consumers’ period in 2015. The decline in remittances could prices decelerated in September 2016 as inflation reflect the worsening economic situation in the Gulf registered negative 0.7 percent yoy compared to because of persistently low oil prices. It could also negative 2.2 percent yoy in June 2016 (the lowest reflect the holding back of sending remittances by recorded since 2010). The decelaration was mainly Jordanian nationals in the Gulf given the uncertainty due to lower drops in food prices and transportation of the economic situation in the oil-exporting costs in Jordan. Food prices dropped by 4.8 percent countries they work in and the potential impact on yoy in September 2016 compared to a 5.2 percent their employment. While travel receipts have also yoy decline in June 2016. Furthermore, prices of been decreasing comparing to 2015, the decline transportation and fuel and lighting dropped by 1.6 has been slowing down as 2016 progresses. Tourist and 0.8 percent (yoy) in September 2016 compared receipts, affected by a slower tourist season (Refer to to 8.6 and 6.5 percent (yoy) drops in June 2016, paragraph 4), registered a lower decline in 9M-2016 respectively. Inflationary pressures are stemming shrinking by 1.2 percent compared to a 7.2 percent from 12.1 percent higher personal effect compared reduction in 9M-2015. Such pressures have affected to 3.6 percent in June 2016, and from 4.8 percent the stock of foreign reserves held at the central bank higher cigarette and tobacco prices reflecting the which has declined to US$ 12.6 bln (7.9 months of increase in cigarette prices as part of revenue- imported goods) by September 2016, 11.1 percent enhancing measures adopted by the government as lower than end-2015 (Figure 19). of July 2016. Moreover, core inflation (excluding food and energy products) recorded 2.2 percent (yoy) in September 2016, compared to its 2016 cumulative yearly average of 2 percent. Core driven by rents (although pricing pressures here have abated) Monetary Policy and and tobacco and cigarettes (Figure 21). Despite persistent deflation, monetary policy action has Finance been unchanged since the last rate cuts in July 2015 although in real terms, and due to the slowdown in 15. The change in consumer prices remains deflation, interest rates were lower as of June 2016 negative, although some pressures on prices are (Figure 22). Personal loans and credit growth from 18 | Recent Economic and Policy Developments JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Interest Rates Amman Stock Exchange Weighted Index Average Lending Rates (%), Nominal Policy Lending Rate (%), Nominal Poin Average Lending Rates (%), Real Policy Lending Rate (%), Real 4,800 4,700 4,600 4,500 12 4,400 10 4,300 8 4,200 6 4,100 4 4,000 2 3,900 3,800 0 8-5-2014 2-1-2014 4-2-2014 6-3-2014 7-4-2014 10-6-2014 10-7-2014 17-8-2014 16-9-2014 21-10-2014 20-11-2014 22-12-2014 1/28/2015 3/2/2015 4/1/2015 5/4/2015 6/4/2015 7/6/2015 8/9/2015 9/8/2015 10/13/2015 11/15/2015 12/16/2015 1/18/2016 2/17/2016 3/20/2016 4/19/2016 5/22/2016 6/23/2016 7/28/2016 8/28/2016 10/6/2016 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 -2 -4 FIGURE 24. Stock exchange index continues to lose FIGURE 22. While nominal rates remain broadly flat… momentum Source: Central Bank of Jordan, Department of Statistics and World Source: Central Bank of Jordan, Department of Statistics and World Bank Bank Commercial Bank Lending Money Supply and Dollarization Rate until September 2016 Total Lending to Private Sector Money Supply (M2) Deposit Dollarization Rate, rhs Total Lending to Public Sector 25,000 Total Lending 34,000 27.0 32,000 25.0 20,000 30,000 23.0 JD million JD Million 28,000 Percent 15,000 21.0 26,000 10,000 19.0 24,000 17.0 5,000 22,000 20,000 15.0 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 0 FIGURE 23. …commercial lending to the private sector FIGURE 25. Dollarization slightly higher than 2015 has been growing at a faster rate in 2016 average Source: Central Bank of Jordan and World Bank staff calculations Source: Amman Stock Exchange and World Bank staff calculations commercial banks to the private sector4 increased and industry sectors, respectively (Figure 24). to 13.9 percent and 9.0 percent, in September 2016 Compared to an average of 17.5 percent in 2014, (yoy) (Figure 23). dollarization of deposit hovered around 17.0 percent during 2015 and most of 2016, increasing to 17.4 16. Lower investor confidence is reflected in percent in September 2016 (Figure 25). slower activity in the Amman Stock Exchange and a modest rise in dollarization rate of deposits. 17. Amid repeated economic shocks, The Jordan Strategy Forum’s Jordan Investment Jordanian banks are stable, profitable, liquid Confidence Index reveals a 0.45 percent reduction in and adequately capitalized. Banks’ nonperforming the index for May 2016 month-on-month stemming loans (NPL) ratio continued to improve for the fourth from lower confidence in the monetary and stock year in a row to 4.8 percent by end-H1-2016 from exchange subindeces (the change in real economic 8.5 percent end-2011 and the lowest since 2008 subindex is positive). The Amman Stock Exchange (4.2 percent) (Table 1). Banks’ Return on Equity Index (ASEI) decreased by 7.4 percent from end- (ROE) and Return on Assets (ROA) both improved 2015 to end-October 2016 as a result of 2.3, 15.7, to 11.5 percent and 1.5 percent respectively by and 14.4 percent decreases in the banking, services end-H1-2016 (compared to 11.0 percent and 1.4 respectively end-2015), whereas the capital 4 Private sector here being defined as financial institutions, adequacy and leverage ratios both slightly retracted private sector (resident) and private sector (non-resident). Recent Economic and Policy Developments | 19 THE WORLD BANK Table 1. Financial Soundness Indicators. (in percent unless otherwise stated) 2009 2010 2011 2012 2013 2014 2015 June-2016* Nonperforming Loans/Total Loans 6.7 8.2 8.5 7.7 7.0 5.6 4.9 4.8 Provisions (in percent of classified loans) 52.0 52.4 52.3 69.4 77.0 77.6 74.7 76.5 Risk-weighted Capital Adequacy Ratio 19.6 20.3 19.3 19.0 18.4 18.4 10.1 18.4 Leverage Ratio 13.0 13.1 13.1 13.3 12.9 12.5 12.7 12.6 ROE 8.8 8.8 8.3 8.6 9.9 11.0 10.3 11.5 ROA 1.1 1.1 1.1 1.1 1.2 1.4 1.3 1.5 Net Profits Before Taxes (in JD million) 460.4 523.4 516.6 587.8 719.5 822.1 862.0 483.9 Liquidity Ratio 159.1 161.4 152.9 143.5 149.1 152.2 149.0 140.7 Growth Rate of Total Assets 7.4 9.6 7.9 4.3 9.1 4.9 5.1 1.3 Growth Rate of Customer Deposits 12.1 10.9 8.3 2.4 10.5 9.3 7.7 1.9 Growth Rate of Credit Facilities 2.1 8.6 9.8 12.5 6.3 5.2 9.6 4.2 * Preliminary and not annualized. Source: Central Bank of Jordan to 18.4 percent and 12.6 percent, respectively, by end-H1-2016 compared to end-2015. For the first time since 2012, banks’ exposure to sovereign debt is lower at the end of the year compared to the previous year. By end-2015, this accounted for 40.6 percent of total assets (and further to 40.4 percent by end-January 2016) compared to 40.8 percent end- 2014. Jordan’s foreign asset position stood ground. The net foreign asset position of commercial banks stands at minus US$ 2.4 billion by end-July 2016 compared to minus US$ 2.8 billion end-2015. 20 | Recent Economic and Policy Developments JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY PROSPECTS 18. While growth in 2016 is expected to remain and implementing the new IMF program could flat, the medium-term appears more promising be challenging particularly given the scope and yet projections are still subject to downside scale of the measures agreed. Finally, Jordan’s risk. The baseline scenario assumes no worsening external position would face further pressures if of the geopolitical situation. It incorporates the expected grants and concessional financing do not impact of fiscal measures assumed under the new materialize. Counterbalancing the large downside IMF arrangement and World Bank energy and risk would require continued implementation of water sector Development Policy Loan associated structural reforms to improve the functioning of the reforms. Agreement on the IMF arrangement itself labor market, improve the investment climate and is expected to unlock grants and concessional unlock access to finance which are vital to stimulate financing for Jordan. Growth is expected to achieve economic activity, and improve welfare. 2.3 percent in 2016 from 2.4 percent in 2015 given the slow momentum witnessed. Jordan’s growth forecast of 2.3 percent for 2016 is in line with the average growth rate for the Middle East and North Africa.5 In the medium-term, economic activity is projected to rebound slightly, to an average of 2.7 percent over 2016-2018. This comes on the back of expected impact from the implementation of growth- enhancing measures adopted by the government, those agreed with the IMF, and the impact of improved access to European markets for Jordanian exports. Despite expectations of higher oil prices, pressures on the external account are expected to subdue as of 2017 with, a pick-up in exports and investment due to diversification efforts and the opportunities afforded by the EU’s Rules of Origin relaxation and energy supply diversification plans, and abatement in the slowdown of remittances and travel receipts. 19. Manifestation of further security spillovers lead downside risks to Jordan. Higher frequency of security incidents are materializing in and around Jordan. Should these further materialize, this could further depress consumer and investor confidence and undo efforts to boost economic activity and attract investment. Containing the fiscal deficit 5 MENA average growth rate for 2016 projected at 2.3 percent. Source: World Bank. MENA Economic Monitor. October 2016.. Prospects | 21 THE WORLD BANK SPECIAL FOCUS ADVANCING HUMAN Context CAPITAL DEVELOPMENT 20. Jordan has invested significant national resources in providing education services (3.5 IN JORDAN THROUGH percent of GDP for pre-tertiary education) – comparable to international averages and above EDUCATION SECTOR what might be expected given its per capita GDP. Education in Jordan has witnessed steady reform, REFORMS6 driven by multi-donor support to the Ministry’s development program, Education Reform for the While Jordan has invested heavily in its education Knowledge Economy (ERfKE) in its two phases. It sector, such investments have not yielded desired has made impressive strides in terms of schooling outcomes. Given the importance of human capital access and attainment – enrolment rates are on development for Jordan’s growth, this Special Focus par with comparator countries, with the exception presents a public expenditure review of basic and of pre-primary enrolment. Even in this sub-sector, secondary education and makes recommendations however, Jordan succeeded in expanding access to around key issues that would require continued pre-primary education from 50 percent in 2009 to 60 attention as Jordan prepares to implement its percent in 2015. The Jordanian educational ladder ambitious National Strategy for Human Resource consists of 2 years of pre-school education (KG1 Development, released in September 2016. While and KG2) for 4-5 year-olds, followed by 10 years of the strategy covers human resource development compulsory basic education (grades 1-10) for 6-15 more broadly, the analysis and findings presented year-olds. Following the compulsory cycle, students below provide the Ministry of Education with can choose to enter either comprehensive secondary suggested directions in aligning public financing for education or applied secondary education (the latter education towards achieving Jordan 2025. As these provided in training centers and as apprenticeships). products collectively suggest, reforms that place the Comprehensive secondary (hereafter referred to focus on improving education outcomes, and not simply as secondary) education lasts 2 years and just distribution of inputs, will propel education to includes both a vocational and an academic track meet the pressing challenges of the economic and that students sort into. The Ministry of Education sociodemographic environment. (MOE) regards academic and vocational secondary education as having a common educational base with additional specialized coursework, whereas applied secondary education is geared towards training and preparation for the workplace. Tertiary education therefore follows comprehensive secondary education only; access to tertiary education is 6 This Special Focus is authored by Samira Halabi (Education Specialist) and Dina Abu Ghaida (Lead Economist) at the World determined through a high-stakes secondary school Bank, based on Education Sector Public Expenditure Review for leaving exam, the tawjihi. the Hashemite Kingdom of Jordan. 2016. Report No: ACS18935. World Bank, Washington, DC. 22 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Table 2. Gross Enrolment Ratios for Jordan and Comparators, 2012-13. Gross enrolment ratio Jordan Tunisia Croatia Thailand Pre-primary 34.2 40.0 63.31 118.52 Primary 98.4 110.3 96.82 92.85 Secondary 87.8 90.6 98.43 86.98 Tertiary 46.6 35.2 61.63 51.23 Source: UNESCO Institute of Statistics 21. Primary, secondary, and tertiary gross Higher Education, Ministry of Social Development, enrolment rates are somewhat comparable to the and Ministry of Defense); the private sector; or the rates in comparator countries7 (see Table 2), but United National Relief and Works Agency (UNRWA), there are considerable within-country differences which runs schools for Palestinian refugees. Public by governorate and gender. Enrolment in basic schools are co-educational only through grade 4 education is near universal across all governorates (and in some communities, only through grade (average national GER of 99.4 percent). In terms 2) after which girls are taught in separate schools of the kindergarten GER, there is a more than predominantly by female teachers and boys by twenty percentage point gap between the top male teachers. Jordan had a total of 6,614 schools governorate Maan (GER of 52 percent) and the in academic year 2013-14, of which 3,694 (or 56 bottom governorate Mafraq (GER of 30 percent). percent) were run by the Ministry of Education and Similarly, there are wide regional disparities in the 2,708 (or 41 percent) by the private sector. Other secondary GER averages, with Maan with a GER of governmental entities were only in charge of a 73 percent compared to 83 percent in Jarash. There total of 38 schools, and UNRWA administered 174 are, in other words, no clear patterns in variation of schools. The share of MOE-administered schools GER across different levels of education amongst the in total number of schools is highest in Mafraq at governorates. But ten to twenty percentage point 87.9 percent, and lowest in Amman at 36.7 percent. gaps demonstrate large geographic variation in GERs Amman has by far the highest share of private for a relatively small country such as Jordan. GERs schools amongst all governorates, amounting to show some variation by gender as well. GERs are 58.8 percent of all schools. slightly higher for girls than boys at the kindergarten and basic education levels, and by the time students 23. Student learning outcomes, however, reach secondary education, the gap has widened remain below international averages, affecting to an 8.7 percentage point gap in GERs in favor of competitiveness of Jordan’s labor force, with wide females over males (figures not shown here). disparities across governorates. Internal efficiency, measured by dropout and progression rates, and 22. More than half of schools in Jordan are external efficiency, measured by employability of run by the Ministry of Education, with the private graduates, are low. Furthermore, low education sector playing a sizeable role in Amman especially. quality has likely contributed to the increasing share Schools in Jordan are run either by the Ministry of of enrolment in private instead of public education, Education; other governmental entities (such as so that today the majority of schools in Amman, the Ministry of Religious Endowments, Ministry of for example, are private schools. Average student performance as measured in international learning 7 These comparators are a subset of those chosen for the Jordan Systematic Country Diagnostic (SCD). The criteria employed in assessments is also relatively low. Figure 26 shows choosing comparator countries for the SCD were: small, upper- Jordan’s below-average performance in international middle/high income, ambitions for manufacturing, dependent on current or capital inflows, and energy importers. mathematics, science, and reading assessments. Although it outperforms other MENA countries in Special Focus | 23 THE WORLD BANK PISA 2012 Equity Profile FIGURE 26. Results of Jordan’s Performance on FIGURE 27. Programme for International Student International Learning Assessments Assessment (PISA) 2012 Equity Profile Source: Calculations based on available years of TIMSS (Trends in Source: Calculations based on PISA 2012 data for Jordan International Mathematics and Science Study) and PISA (Program for International Student Assessment). mathematics and science, gains have been relatively in PISA, the international learning assessment. small and unsteady. In addition, over half of 12th The tawjihi pass rates (Annex 1), which determine grade students fail the tawjihi, the secondary school access to university education, are generally low leaving exam. in the public sector (51.4 percent, with 1,289 secondary schools participating compared to 24. Many university graduates are out of work 65.1 percent in 173 private schools). They also and there is a lack of skilled technicians. Youth vary by governorates, location, school ownership, unemployment stands at around 30 percent. As and gender. These pass rates, while indicative, Box 3 of this Monitor describes, the outlook for do not control for the different factors at play job creation for more educated Jordanians is bleak. and their individual association with pass rates. Out of the 13,498 jobs lost by Jordanians between They also do not allow for an assessment of the 2007 and 2014, 37.8 percent had bachelor degrees potential correlation with school size, class size, and above and 25.4 percent had secondary level or student-ratio. Annex 2 provides the results of education. Job prospects improved for Jordanians regressing the tawjihi pass rates on different school with basic education only. This depicts shifts in characteristics. The results show that, controlling the labor market dynamics in Jordan. According to for the other factors taken into account, tawjihi World Bank estimates, additional years of education pass rates are not associated with school size, are negatively correlated with full-time employment class size, and student-teacher ratio. The largest and positively associated with having a public sector negative association with tawjihi pass rates is found job8. These relationships call into question expected with residing in Aqaba, Jarash, Maan, Madaba, or patterns of returns on education. Zarqa (by comparison with Amman); attending a rented school, as opposed to a school owned by 25. Wide disparities in educational outcomes MOE; and attending a male school, as opposed to by socioeconomic status, gender, and geography a female school. The school attributes of school limit social mobility. Figure 27 points to students size, class size, and student-teacher ratio are not in the top 20 percent income bracket outperforming predictive of one measure of learning outcomes – those in the bottom 20 percent by a large margin tawjihi pass rates – while the school’s governorate, whether it is rented or not, and whether it is a 8 Krishnan, Nandini, Gabriel Lara Ibarra, Ambar Narayan, Sailesh male school are good predictors. In summary, pass Tiwari, and Tara Vishwanath. 2016. Uneven Odds, Unequal Outcomes: Inequality of Opportunity in the Middle East and North rates for the secondary school leaving exam are not Africa. Directions in Development. Washington, DC:World Bank. associated with school size, class size, and student- doi:10.1596/978-1-4648-0786-2. License: Creative Commons teacher ratio, while being negatively correlated Attribution CC BY 3.0 IGO 24 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY with location in certain governorates, male schools, aspect. A teacher is estimated to have two to three and rented schools. times the impact on student performance of any other school factor, including services, facilities, 26. The public system has been severely and even leadership. In 2016, the MOE officially strained as it provides around 150,000 Syrian established a school accountability system reporting refugee students with access to education at all directly to the Minister to incentivize stakeholders, levels. The drive to accommodate as many students particularly school principals and field directors, as possible within existing infrastructure constraints to improve quality. Schools are assessed against a has led to increases in the number of double-shift holistic quality framework which is underpinned schools, reducing instructional time for all students. by four critical domains: teaching and learning; the student environment; community relationships; 27. School size in Jordan is small on average, and leadership and management. This public and and class size and student-teacher ratio are today professional accountability is expected to drive up comparable to OECD averages. School size, class learning and quality. The Ministry has also embarked size, and student-teacher ratio are key education on a school consolidation program to reduce the system indicators that the Jordanian Ministry of number of small schools. In early 2016, the MOE had Education is concerned with – particularly in the provided students from 28 small schools (less than context of an influx of Syrian refugee students into 19 students) with either means of transportation or the public education system. In fact, school size in a transportation allowance to attend larger schools. Jordan is small on average, and class size and student- teacher ratio are today comparable to OECD averages 29. Evidence suggests that cognitive skills have – and all three indicators are on a decreasing trend. large economic effects on individual earnings and Very small schools are mainly a rural phenomenon on national growth9 and that workers’ productivity but also result from the need to resort to renting depends both on years of education and what is buildings due to lack of land for construction of learned at school.10,11 Research also suggests that schools. Overcrowded classrooms are very much an relatively small improvements in the skills of a urban phenomenon limited to a few governorates. nation’s labor force can have very large impacts on future well-being.12 The following sections highlight 28. Under the current leadership, Jordan has select issues from a public financing perspective taken bold steps to address some of the structural and makes recommendations to strengthen the issues that impact the quality and efficiency effectiveness of education spending. of education, including 1) reforming teacher recruitment and selection processes to raise quality 2) establishing an accountability system to assure school quality, and 3) consolidating smaller schools in favor of better staffed and better equipped schools with free transportation. As a measure to improve teacher selectivity, the 9 Hanushek, Eric A., and Ludger Woessmann. 2007. “The Role of MOE reformed its teacher selection process in Education Quality for Economic Growth.” Policy Research Working 2015. Previously, teacher vacancies had been filled Paper No. 4122, World Bank, Washington, DC. by applicants to the Civil Service who met minimum 10 Heckman, James J., Anne Layne-Farrar, and Petra Todd. 1995. qualification requirements on a first-come, first- “Does Measured School Quality Really Matter? An Examination of the Earnings-Quality Relationship.” NBER Working Paper Series serve basis. Currently, all applicants undergo a No. 5274, National Bureau of Economic Research, Cambridge, MA rigorous and selective examination process, and 11 Murnane, Richard J., John B. Willett, and Frank Levy. only the top performers are selected as teachers. 1995. “The Growing Importance of Cognitive Skills in Wage This reform was a welcome step to raise teacher Determination.” The Review of Economics and Statistics 77 (2): 251–66. quality, which, among schooling inputs, matters most to student achievement than any other 12 OECD. 2010. The High Cost of Low Educational Performance: The Long-Run Economic Impact of Improving PISA Outcomes. Special Focus | 25 THE WORLD BANK is roughly comparable to the corresponding OECD Overview of Public average 2011 shares of education spending, which are 4.2 percent of GDP and 9.5 percent of total Education Spending public expenditure (OECD 2014). 30. Jordan spends comparable shares of GDP 32. Jordan spends more than expected for its and total public spending on education as the level of GDP per capita on primary and secondary OECD averages, and higher than expected shares education. In Jordan, this spending is driven largely when taking its GDP per capita into account. by recurrent and not capital expenditures, as detailed Capital spending in the education sector is classified in the following section. There is some evidence that both under the Ministry of Education as well as the amount of public resources spent on education under the Ministry of Planning and International depends to some degree on the level of economic Cooperation, with the bulk being treasury-financed development of the country. In other words, countries spending (as opposed to loans) under the Ministry with different levels of GDP per capita do not spend of Education. the same shares of GDP on education. Instead, in richer countries, the share of GDP allocated to 31. The share of capital spending in total public primary education tends to be lower than education spending is relatively low. This in poorer countries, while the reverse is observed contributes to the fact that recurrent spending on for secondary education. Figure 28 provides a education in Jordan is substantial and equivalent scatter plot of World Bank data on GDP per capita to the country’s budgetary commitment (on a against UNESCO Institute of Statistics data on public recurrent basis) to defense, with other sectors spending on primary education as a share of GDP, as lagging significantly behind. Within the education well as a fitted line representing the expected level sector, basic education captures the majority of public spending as a function of GDP per capita. of capital spending and exhibits relatively high The line slopes downwards, indicating a smaller recurrent unit costs. As Table 3 shows, MOE share of GDP for primary education the richer the expenditures amounted to roughly 943.3 million country. Jordan lies above the fitted line, implying Jordanian dinars (JD) in 2013, which translates to that the country spends more than expected for its 4.0 percent of gross domestic product (GDP) and level of GDP per capita on primary education. Figure 11.1 percent of total public expenditures. Table 29 provides the parallel scatter plot and fitted line 3 also shows that the share of public education for secondary education, and again Jordan lies above spending in GDP and as a share of total spending the line, indicating higher than expected spending has been relatively stable since 2008. This pattern on secondary education for its per capita GDP. Table 3. Ministry of Education Expenditures (as share of GDP) and Total Education Expenditures (2008-13). (JD million) 2008 2009 2010 2011 2012 2013 Nominal GDP 15,593 16,912 18,762 20,477 21,965 23,852 Total public expenditures* 5,432 6,031 5,708 6,797 6,946 8,508 -- as % of GDP 34.8 35.7 30.4 33.2 31.6 35.7 Ministry of Education expenditures 590.5 625.1 639.7 766 834.4 943.4 -- as % of GDP 3.8 3.7 3.4 3.7 3.8 4.0 -- as % of total public expenditures 10.9 10.4 11.2 11.3 12.0 11.1 * includes transfers to NEPCO in 2012-2013 Source: Ministry of Finance. General Government Finance Bulletin, Studies and Economic Policies Directorate, Vol. 17, No. 6, pages 10, 18; and Ministry of Finance. June 2014. General Budget Final Accounts for Fiscal Year 2013, pages 503-506 26 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY FIGURE 28. Correlation between GDP per capita and FIGURE 29. Correlation between GDP per capita and government spending on primary education as a share of government spending on secondary education as a share GDP, 2014 of GDP, 2014 Source: Heejin Kim, Janice and Quentin Wodon. 2015. Public Education Source: Heejin Kim, Janice and Quentin Wodon. 2015. Public Education Cost Benchmarking for Jordan, World Bank, Figure 1(a), page 2. Cost Benchmarking for Jordan, World Bank, Figure 1(b), page 2. 33. Total capital spending on education 35. The Jordanian budgetary commitment amounts to only 5.7 percent of total spending to the education sector is demonstrated by on education in 2013. By comparison, the OECD education’s share in total recurrent spending, average is higher at 7.4 percent of total education at roughly 13 percent, which is substantial and spending on non-tertiary education. In terms of equivalent to that of defense, with other ministries capital spending, budget data distinguish first and budgetary entities lagging significantly between capital spending financed by the treasury behind. As Table 4 shows, the highest share of versus by loans, with treasury-financed spending recurrent spending is by the Ministry of Finance being the overwhelming majority in 2013 (over (over 40 percent), followed by the Ministry of 97 percent). The big spending entities in terms of Defense and the Ministry of Education. The Ministry treasury-financed capital spending are the Ministry of Finance’s large share in recurrent spending can of Finance and the Ministry of Public Works and be explained by the fact that it includes debt interest Housing, with the Ministry of Education ranking payments (over 30 percent of Finance’s spending) only 8th at 3.9 percent of capital spending out of and pension payments (over 40 percent of Finance’s the treasury. Thus, loan-financed capital spending spending). amounted to 17.9 percent of total education sector capital spending. As it turns out, MOPIC financed 36. Wide discrepancies in unit costs across construction of 25 schools partially out of the education levels suggest that more balanced treasury in addition to loans. spending may be necessary. Combining data on education current spending and numbers of enrolled 34. Substantial donor-financed capital students at the different levels of education, Table investments remain off-budget, distorting overall 5 presents the recurrent unit cost of education at actual costs. For example, between 2002 and 2014, each level. The table takes only recurrent cost into USAID invested US$458 million in the education account as capital spending tends to be “lumpy” sector. Recent achievements include construction resulting in potentially wide fluctuations in the unit and furnishing of 27 new schools; rehabilitation and cost from year to year, or alternatively contested expansion of 97 existing public schools; renovation methodologies of amortization. Taking unit costs of playgrounds and/or provision of sports kits at for a basic education student as the comparator 100 schools; and training of 20,000 educators in in each year, it is clear that a child in kindergarten induction, in-service, leadership, and mentorship costs substantially less, and even a student at the programs. secondary level expends fewer resources. The Special Focus | 27 THE WORLD BANK Table 4. Total Recurrent Spending by Budget Entity (2013). Budget entity Current Expenditures (JD) Percentage Share (%) Ministry of Finance/HQ 2,448,535,998 40.43 Ministry of Defense 834,000,000 13.77 Ministry of Education 803,890,217 13.27 Ministry of Interior/General Security 502,986,420 8.31 Ministry of Health 407,579,785 6.73 Ministry of Interior/Darak Forces 153,220,031 2.53 Ministry of Interior/Civil Defense 145,400,000 2.40 Royal Medical Services 143,100,000 2.36 Ministry of Social Development 106,910,096 1.77 Ministry of Higher Education and Scientific Research 63,919,313 1.06 All other budget entities 446,578,840 7.37 Total 6,056,120,700 100.00 Source: Ministry of Finance. June 2014. General Budget Final Accounts for Fiscal Year 2013, pages 209-10 Table 5. Unit Cost, Current Expenditure (current JDs). Level of education 2012 2013 Kindergarten 131 115 Basic 538 597 Secondary 484 477 Vocational 782 Source: Ministry of Finance. June 2014. General Budget Final Accounts for Fiscal Year 2013 and MOE EMIS discrepancy between the basic education and Jordan reward initial qualifications, seniority, and Kindergarten education is to be expected, though personal teacher attributes, as opposed to being an arguably in Jordan it is relatively wide as Kindergarten instrument for policy makers to incentivize better enrollment is not universal. A lower unit cost for teaching performance or other desired education secondary students compared to basic students is, sector outcomes. Teachers in Jordan are relatively however, unexpected as secondary students require well-paid, based on comparisons with other tertiary- more specialized teaching and learning materials, educated workers in the economy, relative to per for example. By way of comparison, the unit cost of capita GDP, and taking teaching time into account. a pre-primary pupil in the OECD is 10 percent lower than a primary student, and a secondary student is 38. Teachers’ salaries represent the largest 10 percent higher. single cost in formal education and have a direct impact on the attractiveness of the teaching 37. Compensation captures a high share of profession. They influence decisions to enroll in recurrent spending in the education sector in teacher education, become a teacher after graduation Jordan, leaving few resources for non-wage inputs. (as graduates’ career choices are associated with The share of teachers in total education sector staff relative earnings in teaching and non-teaching is 10 percentage points higher than the OECD occupations, and their likely growth over time), average. The teacher pay scale and allowances in return to the teaching profession after a career 28 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY 40. The number of teachers has grown consistently over the last decade in line with student numbers, so that MOE teachers amounted to a total of 54,609 in academic year 2001-02 (of Number of teachers whom 32,184 were female and 22,425 male) and Total Male reached 75,401 in 2012-13 (46,120 female and Female 29,281 male), Figure 30. This translates to an average annual growth rate of 3 percent over the period 2001-13. However, the number of female teachers grew at a faster rate than male teachers, so that the average annual growth rate for female FIGURE 30. Number of Ministry of Education Teachers, teachers was 3.3 percent compared to 2.5 percent 2001-13 for male teachers. Source: EMIS, MOE 41. While wages and “additional allowances” Table 6. Main components of education sector staff constitute the bulk of education staff compensation, 2013. remuneration, financial incentives need to be Education staff remuneration Share of total (%) better designed to affect learning outcomes. Wages 36.2 Wages constitute 36.2 percent of total education Additional allowance 36.6 staff remuneration, so-called additional allowance13 Cost of living allowance 24.1 another 36.6 percent, cost of living allowance 24.1 percent, and next in size in terms of share of total is Family allowance 1.4 the family allowance at 1.4 percent of total, with all Source: Ministry of Finance. June 2014. General Budget Final other allowances representing 1 percent or less of Accounts for Fiscal Year 2013, pages 158-174 the total (See Table 6). This approach to allowances blunts their usefulness in terms of achieving interruption, and/or remain a teacher (as, in general, certain desired results, such as location of teachers the higher the salaries, the fewer the people who in certain areas, or teaching of certain subjects, choose to leave the profession). Since compensation or motivating certain behaviors of teachers. For and working conditions are important for attracting, example, additional payments in OECD countries developing, and retaining skilled and high-quality are most often awarded for particular responsibilities teachers, policy makers carefully consider teachers’ or working conditions, such as teaching in more salaries as they try to ensure both quality teaching disadvantaged schools, particularly those located and sustainable education budgets. in very poor neighborhoods or those with a large proportion of students whose language is not the 39. 92.3 percent of total recurrent spending language of instruction. These schools often have was dedicated to worker compensation in 2013, difficulties attracting teachers and are more likely with non-wage recurrent spending amounting to have less-experienced teachers. In addition, half to 7.7 percent. The non-wage recurrent spending of OECD countries provide additional payments includes spending on rent, utilities, maintenance, for special activities, e.g. sports and drama clubs, and cleaning – i.e. basic operations of educational and teaching students with special needs in regular institutions – as well as direct teaching inputs such schools. as stationery, learning materials, and textbooks. By contrast, the 2011 OECD average share of compensation in total recurrent spending was 78.9 percent, leaving 21.1 percent for non-wage inputs. 13 Additional allowances can include allowances for staff who have supervision or training roles, location and relocation allowances, and rank allowances for department heads or school principals. Special Focus | 29 THE WORLD BANK 42. Ensuring that teachers are efficiently children in Jordan will be in education in the deployed to where their skills are most needed is 2016/17 school year, provided the international another priority area for teacher reform in Jordan. community funds the costs involved for their Absent a purposeful allocation, teachers tend to education. Under the program of support to gravitate towards better-off schools and easiest “Accelerating Access to Quality Formal Education”, to teach subjects, widening learning inequalities the MoE and UNICEF are targeting some 81,000 and creating shortages in critical teaching areas. Syrian refugee children who remain out of With regards to the former, Jordan has already begun school, of which 50,000 are eligible to attend to address this challenge by providing monetary formal education and 31,000 require learning bonuses and subsidized housing to incentivize opportunities and pathways back into the formal teachers in taking up posts in hard-to-staff schools. system wherever possible. As of September 2016, Yet, further incentives might be needed to attract an estimated 75,000 more Syrian children will the best teachers to low-performing schools. For receive an education through the MoE. Donor example, high-performing education systems support to priority education needs defined by the including Australia, New Zealand, and the United Government amount to USD 271 million out of States provide scholarships, travel stipends, and USD 313.4 million requested. promotion opportunities as additional incentives to attract talented teachers to disadvantaged areas. 45. The ratio of Syrian to Jordanian students in host community MOE schools is roughly 43. Mechanisms to incentivize teachers to 1:10, a pattern which has implications for the take up teaching posts in critical subjects are cost and quality of service delivery. According absent. Jordan has identified important teacher to the Government’s Jordan Response Plan for shortages in critical subjects such as mathematics, the Syria Crisis 2016-2018, Jordan hosted about science and technology. Teacher reform should 630,000 Syrian refugees by the end of 2015, 83 focus on introducing effective incentive packages to percent of whom settled in host communities, offset shortages in these critical subjects by attracting particularly in the urban area of Amman and highly qualified teachers and even mid-career the northern governorates of Jordan, with the professionals. A number of education systems have remainder in refugee camps. Syrian children, designed and implemented incentives of this type, if attending school, are either in schools in the offering Jordan a wealth of experiences for guiding refugee camps, or integrated into Jordanian public its policy reform. For example, in the US State of and private schools. In most instances where Utah, mathematics and science teachers receive a additional Syrian students result in overcrowding US$ 5,000 bonus on top of their base salary. In the in public schools, a second shift is introduced State of New York, teachers for shortage subjects that is dedicated to the Syrian students. Data at (mathematics, science, and special education) the end of 2014 indicate a total of 129,058 Syrian receive housing assistance of up to US$ 15,000. refugee children in public schools in Jordan, of Similarly, the United Kingdom covers a significant which 23,226 (18 percent) are in refugee camp portion of qualified mathematics, science, special schools; 59,627 (46 percent) in public schools education and technology teachers’ tuition expenses (regular shift); and 46,205 students (36 percent) as an incentive to attract them into these subjects. in second shifts in public schools. The number of Syrian refugee children in public schools went up to 145,458 by the end of 2015, but the breakdown of 18 percent enrolled in camps and 82 percent in host communities remained. For students in Impact of Syrian crisis refugee camp schools and in public school second shifts, additional teachers are hired. For students in 44. As part of the Jordan Compact, the regular shift public schools, an important concern Kingdom committed to ensure that all Syrian is overcrowding and the impact this would have 30 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY on the quality of education for all students in the for class size and student-teacher ratio. In addition, class, both Jordanian and Syrian. new schools to be constructed are to accommodate above 500 students, which is greater than the current 46. The question of the unit cost of a basic average school size and in line with efficiency and student has gained importance as the Jordanian quality gains. education system absorbs the influx of Syrian refugee children. It became necessary to estimate in 48. Rather than relying on the unit cost some manner the additional financial cost incurred approach, the Plan proposes a number of projects by the Jordanian public education system in order to that aim to improve access to quality and inclusive accommodate the Syrian children, and the approach education for Syrian refugees and vulnerable deemed most appropriate for some time relied on Jordanians. The Plan includes boosting the capacity using the number of enrolled Syrian students and of the public education system with additional the unit cost of a student in the Jordanian system to learning spaces, remedial/catch-up classes for those estimate the total cost of Syrian enrollment. At the children who have missed out on weeks or months time, the MOE preferred to calculate the unit cost not of schooling, and access to improved and diversified only based on recurrent costs, however, factoring certified alternative learning opportunities for in instead estimates on depreciation of physical children and youth. Projects are also to deliver infrastructure as well as other costs, resulting in capacity building of teachers to safeguard the quality higher unit costs than those reported above. With of education. The resulting three-year Plan starts time, the MOE became very concerned with erosion with a baseline number of 156,663 Syrian children of certain service standards in the education sector enrolled in education services (whether formal, in terms of class size and student-teacher ratio as non-formal, or informal), and targets increases in a result of the Syrian refugee influx, taking these enrolment to 222,000 in 2016; 248,000 in 2017; issues into account in estimating the financing needs and 272,800 in 2018. The increased enrolment is not for absorption of Syrian students into the Jordanian expected to result from influx of additional Syrian system. refugees into Jordan, but rather from increased enrolment rates of Syrian children already in Jordan. 47. The Jordan Response Plan 2016-2018 estimates education sector needs by carrying out 49. In August 2016, Jordan signed a grant an education sector vulnerability assessment at agreement with the U.S., Britain, Norway and the district level by using the three indicators of Switzerland that will provide $100 million to school size, class size, and student-teacher ratio. help place Syrian refugee children in school. A It defines the national standard for class size at 27, range of projects are proposed in the Plan, spanning thereby identifying vulnerability to crowding in improving the capacity of education authorities to classes to be most severe in seven districts of the ensure the continuous delivery of quality inclusive four governorates with high concentrations of Syrian education services; enhancing access to safe and refugees, i.e. Amman, Zarqa, Irbid, and Mafraq. protective learning spaces; and increasing provision The assessment further finds that 150 new schools of adequate, protective, and safe learning spaces would be needed to meet a national standard of 19 and facilities. In terms of associated costs, an classes per school, which translates to a school size estimated US$850 million is needed over the 2016- of 513 (assuming an average class size of 27). These 2018 period, with over US$470 million dedicated to schools would be located primarily in the same facilities, i.e. construction of 150 new schools and four governorates with highest concentrations of additional classrooms or renovation of 450 priority Syrian refugees. Finally, the assessment finds that an schools. The fact that attention is being paid not only additional 8,600 teachers would be needed to meet to construction of new schools but also to adding a national standard of 17 students per teacher. In classrooms to existing schools is warranted given other words, the MOE is aiming to absorb the Syrian the relatively small average school size in Jordan. In students while maintaining its current standards other words, the Plan recognizes the necessity for a Special Focus | 31 THE WORLD BANK dual approach that is based on detailed analysis of making regarding expansion of existing schools or the needs on the ground in specific locations in the establishment of new ones. Anecdotal evidence country. suggests that too often in Jordan, communities insist on expansions of schools and construction of new ones and politicians comply rather than risk losing favor with communities. Recommendations and 52. By focusing seriously on lagging regions, MOE could address variation across governorates Next steps in terms of enrolment rates in pre-primary and secondary education, as well in tawjihi pass 50. As a first priority, there is a need to rates. There is a clear need for the MOE to try and consolidate at the Ministry of Education, if not understand the reasons behind this geographic management of capital spending, at least the variation better and to try to address them. The accounting of capital spending. Currently, no fact is that governorates do vary widely in terms of single government entity, neither the MOE nor population density, for example, with 70 percent MOPIC, has a complete picture of capital spending of the population estimated to reside in just 3 for the education sector, i.e. including financed by governorates (Amman, Irbid, and Zarqa). At the same the treasury as well as loans and donors. While there time, it is not only population density that plays a role may be reasons for managing funds from different in terms of learning outcomes, as the governorates sources by different ministries, the Ministry of with lower tawjihi pass rates vary in this respect Education is the appropriate government entity as well. Yet the MOE treats all governorates in the for oversight of all capital spending, including same manner and its departments are organized by determining priority needs and deploying resources level of education and pedagogical theme instead accordingly. Another set of issues concerns capital of including consideration of lagging regions, for investments in the education sector, and the need to example. tackle the small school size, rented schools, as well as localized overcrowding. 53. The budgeting process is not conducive to tackling the issue of geographic variation in 51. MOE should strengthen its planning education sector outcomes. Discussions with MOE capacity by utilizing existing data and employing staff indicate that education sector budget preparation more robust planning tools. The Ministry of is done very much on an annual historical basis and Education today has an Education Management based simply on demographic needs. The budget Information System that is capable of supplying preparation process may be described as follows: much useful data for planning purposes in terms in April each year, the MOE Finance Unit solicits of numbers of students, teachers, and classrooms, budget requests for the following year from the 43 amongst other information. However, in order Education Directorates in Jordan. The Directorates to make decisions regarding expanding existing prepare their requests based on the student numbers schools or building new ones, the MOE requires they anticipate for the following year. The Finance a geographic database that maps schools across Unit compiles all requests and provides them to the the country in addition to the EMIS. Ideally, it also individual Ministry Departments for their review. requires relatively detailed population data and In July, a first draft of the Ministry budget is then population projection data. The MOE has begun submitted to the General Budget Directorate. In working on a school mapping as it recognizes that other words, Education Directorates mostly request overcrowded classrooms are not the norm but rather additional teachers and other standard inputs based specific to certain areas of the country. However, the on projected enrollment for the following year. question remains whether the data from this school mapping will be used for purposes of decision 32 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY 54. There is little effort at prioritization of certain line items above others. In terms of budget execution, every month the Education Directorates submit their payment requests, which are compiled in the Ministry and submitted to the Ministry of Finance. Every year, certain line items run out of funds and transfers from other line items that have under-disbursed are made. For example, in 2014 the funds for water and electricity costs were depleted, and transfers were made out of the funds for textbooks. Here again, – with the exception of salaries, which are always the first responsibility in terms of disbursement. Instead, arguably a more “projectized” approach, one that the Ministry has recently employed in addressing the Syrian refugee students crisis, is likely more appropriate. Given the recent experience with devising a 3-year plan for the Syrian refugee students, education sector stakeholders in Jordan seem well poised for similar planning for lagging regions in the country. Special Focus | 33 THE WORLD BANK Appendix Annex 1. Tawjihi Results, by School Characteristics, 2013. Tawjihi Pass Rate No. of Schools Overall 51.4 1289 Ministry of Education 49.4 1082 Private 65.1 173 Ministry of Education: Tawjihi Pass Rate No. of Schools Tawjihi Pass Rate No. of Schools Governorate School ownership Ajloun 48.5 41 Owned 49.5 1063 Amman 53.4 251 Owned & rented 49.7 11 Aqaba 40.4 29 Rented 41.3 8 Balqa 50.7 89 School gender Irbid 51.4 195 Female 58.3 283 Jerash 43.3 48 Male 40.1 474 Karak 51.4 82 Co-educational 55.3 325 Maan 40.5 49 Type of secondary school Madaba 39.6 36 Academic 48.6 891 Mafraq 50.8 141 Academic & technical 54.2 165 Tafilah 53.4 28 Technical 47 26 Zarqa 43.4 93 Geographic location Urban 51.6 528 Rural 47.4 554 Source: EMIS and MOE 34 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Annex 2. Regression results for tawjihi pass rates and school characteristics, 2014. Coefficient Standard Error t-statistic p-value Governorate Ajloun -0.06 0.04 -1.62 0.105 Aqaba -0.19 0.04 -4.66 0 Balqa -0.02 0.03 -0.87 0.387 Irbid -0.05 0.02 -2.6 0.009 Jerash -0.12 0.03 -3.65 0 Karak -0.07 0.03 -2.25 0.024 Maan -0.21 0.04 -5.95 0 Madaba -0.15 0.04 -3.88 0 Mafraq -0.05 0.02 -1.85 0.065 Tafilah -0.06 0.04 -1.31 0.19 Zarqa -0.11 0.03 -4.27 0 Geography Village -0.04 0.02 -2.45 0.014 School ownership Owned & rented 0.01 0.06 0.12 0.902 Rented -0.17 0.08 -2.26 0.024 School gender male -0.18 0.02 -10.9 0 mixed 0 0.02 -0.26 0.792 Type of education Academic and technical -0.06 0.02 -3.07 0.002 Technical -0.06 0.05 -1.27 0.204 Total number of students 0 0 4.59 0 STR -0.03 0 -8 0 Class size 0.01 0 3.23 0.001 _cons 0.8 0.04 20.68 0 Source: Authors’ analysis based on EMIS and MOE Tawjihi data Special Focus | 35 THE WORLD BANK to Jordan which obliged the government to resort to THE ECONOMIC more expensive energy sources, among other things. IMPACT OF THE ARAB 56. This special focus estimates the economic cost of the Arab Spring. To the best of our knowledge, SPRING ON JORDAN14 there are no studies that quantified the economic impact of the Arab Spring spillovers on Jordan. This This special focus estimates the output forgone due piece thus aims to fill this gap by quantifying the to the shocks that have happened since the onset of output forgone due to the Arab uprisings between the Arab Spring in 2011. In particular, it adopts the 2011 and 2015. “Synthetic Control” methodology, that constructs a counterfactual of how the Jordanian economy would have performed had the Arab Spring and related events not occurred. Results reveal that each Jordanian citizen is estimated to have lost approximately US$ Empirical Methodology 575 per year on average from 2011 to 2015. To recuperate these losses, authorities are encouraged 57. In order to estimate the economic cost to adopt sound macroeconomic policies, strengthen of the AS, this paper employs the Synthetic their external position through attracting higher Control Method (SCM) that estimates year-by- foreign direct investment and exports, benefit year how the Jordanian economy would have from the available human capital skills more aptly performed if the Arab Spring and related events by strengthening the business environment, and that followed did not occur (i.e. investigating maintain an acceptable level of foreign reserves. These Jordan’s counterfactual had the situation policies should also be complemented by increased remained unchanged). The SCM is a generalization assistance from the international community. of the matching and difference-in-difference (DiD) techniques conventionally employed in micro- econometrics. This approach is also well suited for macroeconomic applications when the number of observations in both the treated and control groups Context is relatively small.15 55. Economic growth has decelerated since 58. The SCM has been widely used in various the start of the Arab Spring (AS) in 2011. The social science disciplines over the past few uprisings, which were sparked on December 17, years.16 In particular, it was adopted to evaluate the 2010 by the self-immolation of Mohamed Bouazizi impact of: the Arab Spring on the Tunisian economy in Tunisia, triggered a domino effect in several Arab (Matta, et al., 2016), terrorism in Spain (Abadie and countries, including Bahrain, Egypt, Libya, Syria and Gardeazabal, 2003), civil wars (Bove et al., 2014), Yemen. While the political environment in Jordan was trade openness (Nannicini and Billmeier, 2011), not majorly impacted by the AS apart from the 2011 economic liberalization (Billmeier and Nannicini, protests, the Jordanian economy suffered. Growth 2013), natural resource discoveries (Smith, 2015), per capita averaged -4.3 percent during the period inflation targeting (Lee, 2011), natural disasters 2011-2015 down from a 3.1 percent average over the five years preceding the uprisings. In particular, 15 For a detailed methodology of the SCM and the since 2011 the Jordanian economy has faced severe corresponding mathematical derivations, see Abadie et al. (2010). For details about the advantages of using the SCM, the challenges brought by (i) the huge influx of Syrian reader is referred to pages 4 and 9 of Costalli et al. (2014) and refugees, (ii) insecurity in neighboring Syria and section 4.1 of Matta et al. (2016). Iraq and (iii) the disruption of Egyptian gas inflow 16 The SCM was considered by Athey and Imbens (2016) to be the most important innovation in the program evaluation 14 Authored by Samer Matta, Economic Analyst, World Bank. literature over the last decade. 36 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY (Cavallo et al., 2013) and fiscal consolidation (Kleis regime. The first four variables are chosen because and Moessinger, 2016), on economic activity. they are components of the main variable of interest, Moreover, Hope (2016) and Mäkelä (2016) estimated real GDP per capita.17 Secondary school enrollment the impact of joining the European Monetary is included in the set of covariates because it is a Union on current account balances and long-term key driver of future economic growth (Barro, 1991). government bond yields, respectively. In a different Moreover, net fuel exports as a share of GDP is context, Jinjarak et al. (2013) used this technique to considered a control because the Arab Spring might examine the effect of changes in the capital account have impacted oil markets and consequently the regime on capital inflows in Brazil between 2008 and global economy as it affected Libya and Bahrain, two 2011. Furthermore, this approach has been used to major oil exporting countries.18 In addition, Klien and evaluate a range of treatments and policy changes Olivei (2008) argued that the depth of the financial in the health (Bauhoff, 2014; Kreif et al., 2015) and sector, which can be proxied by money supply (Khan labor sectors (Bohn et al., 2014; Calderón, 2014), et al., 2001), influences economic growth hence among others. the choice of money supply as a control. Finally, to control for political and institutional factors which 59. In essence, the SCM is a data driven might impact economic activity (Acemoglu et al., approach that estimates, based on a weighted 2001; Góes, 2016)I build a panel structural vector average of non-treated units (in our case countries) autoregression (SVAR), polity2 score is added which that were not impacted by the treatment (in is widely used to measure a country’s political regime our case the Arab Spring), a counterfactual (Aidt et al., 2010).19 For each of these variables, we with approximately the same characteristics account for possible different underlying trends by as the treated unit (in our case Jordan) during dividing our pretreatment period by half and then the pre-intervention period. In this context, we taking the decadal average over each sub-period as a develop “Synthetic Jordan” which approximates the covariate (Matta et al., 2016). Finally, and in order to estimated counterfactual for Jordan in the absence maximize the match between the outcome variable of the Arab Spring, using country-level panel data of the treated country and its synthetic counterpart for Jordan and all the other countries in the world. during the pre-political turmoil period, four-year Once, a counterfactual is developed prior to 2011, period averages of per capita GDP are added to the the effect of the Arab Spring is then calculated as the set of covariates. difference between the actual and Synthetic GDP per capita during the period 2011-15 (post-Arab 61. Control countries that were impacted by Spring period). exogenous shocks are omitted to avoid biased results. As explained by Abadie et al. (2010), control countries should not have been exposed to a major exogenous shock from 2011 onwards, otherwise these may impact the per capita GDP path of Data 60. Synthetic Jordan is constructed using the 17 We also intended to control for fiscal policy using the fiscal April 2016 version of the World Development balance, in addition to the variables that compose the supply side of GDP (industry, agriculture and services), however data Indicators (WDI) published by the World Bank for these variables were missing for many countries in our from 1990 to 2010. Our outcome variable is real dataset. In cases where data were available, we experimented with different sets of covariates and the results were almost GDP per capita while the set of covariates, based unchanged. on which Jordan and its synthetic counterpart are 18 Net Fuel Exports (as a % of GDP) is the difference between matched (prior to 2011) includes: investment, Fuel Exports (as a % of GDP) and Fuel Imports (as a % of GDP), consumption, exports, imports (all as a ratio of both taken from the WDI database. GDP), secondary school enrollment, net fuel 19 All the variables are downloaded from the WDI database exports, money supply and the type of political expect for the polity2 index which is taken from the Polity IV Project. Special Focus | 37 THE WORLD BANK Table 7. Country Weights in the Synthetic Jordan. Control Country Weight (%) China 13.8 Djibouti 21 Grenada 8.6 Guyuna 35.6 Hong Kong 4.5 Moldova 13 Zimbabwe 3.5 Total 100 FIGURE 31. Real GDP per capita: Jordan vs Synthetic Jordan Source: Author’s own calculations Source: Author’s own calculations Table 8. Averages of GDP per capita Characteristics explanation on why they were excluded, please refer Between 1990-2010 to Annex 3 in the Appendix. (Percent of GDP, unless stated otherwise). Actual Synthethic Control Results Real GDP per Capita (US$) 3,429.8 3,469.8 Consumption 98.7 86.6 GCF 27.5 27.6 62. Table 7 shows that Synthetic Jordan is Exports 50.1 60.6 best reconstructed as a weighted average of seven Imports 76.3 74.7 countries, while Table 3 displays the average pre- Net Fuel Exports -10.2 -9.3 2011 values of the variables of interest for Jordan Secondary School Enrollment ($) 86.0 67.9 and the estimated Synthetic Jordan. In general, M2 118.5 81.9 Table 8 suggests that the constructed synthetic Jordan matches the actual economy reasonably well Source: Author’s own calculations during the pre-2011 period. Synthetic Jordan, leading to a biased estimate.20 For 63. Each Jordanian citizen is estimated to that reason, the following were excluded from the have lost approximately US$ 2,877 cumulatively sample: (i) countries that were impacted, directly or from 2011 to 2015. Figure 31 depicts the paths of indirectly, by the Arab Spring and (ii) countries that per capita GDP path of actual and Synthetic Jordan, were hit by an unexpected exogenous shock (such which are very similar up to 2010, but diverge as natural disasters, conflicts or adverse economic markedly thereafter implying that the events that spillovers from neighboring countries) after 2010. happened since the onset of the Arab Spring have For a list of the omitted countries and a brief adversely impacted the Jordanian economy. The divergence reaches a difference of US$ 901 per 20 Ideally, we would have restricted our set of potential capita in 2015. control units to countries in the MENA region that share similar characteristics with Jordan (e.g. language, culture and weather). However, this is not feasible as most MENA countries have been 64. While the SCM calculates the magnitude impacted by the Arab Spring (either directly or indirectly) and of the difference between the actual real GDP therefore we would not be able to construct a synthetic Jordan. Consequently, our set of controls consisted of the global sample per capita compared to its synthetic counterpart of economies, “as this helps to regain comparable GDP levels since 2011, it does not estimate standard in the comparison countries” (Billmeier and Nannicini, 2013, errors. Consequently, the SCM obstruct us from p. 992). 38 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Table 9. DiD Estimates. results and shows that is significantly negative suggesting that the economy lost output because of the protests that happened in Jordan and across the Dependent Variable MENA region in 2011. Meanwhile, the significantly β1 0.003 negative indicates that the Jordanian economy (0.051) was further impacted by the different shocks that β2 0.362 happened since 2012 which are directly related to (0.043) the Arab Spring. These events include, (i) the large β3 -0.129** inflow of Syrian refugees in 2012-2013 (World Bank, 2016), (ii) the disruption of Egyptian gas inflow to (0.056) Jordan in 2013-2014 and (iii) the trade route closures β4 -0.138** with Syria and Iraq as a result of the worsening (0.056) security situation in these two countries since 2015.21 N 52 Overall, the DiD estimates, which support the R2 0.41 SCM results, indicate that the Arab Spring and the Source: Author’s own calculations. *, **, *** indicate significance subsequent events that followed adversely affected levels of 10%, 5%, and 1%, respectively. Robust standard errors are economic activity in Jordan. in parenthesis. making formal statements regarding the statistical significance of the results. To address that, a Difference-in-Difference (DiD) model for the actual Some Policy and counterfactual GDP per capita corresponding to Jordan is estimated following Campos et al. (2014). Recommendations to Consequently, we estimate the following model: Boost Recovery 66. In this section, some policy recommendations are proposed based on literature to support Jordan’s recovery back to where: its counterfactual. According to Loayaza et al. represents the real GDP per capita of unit (Jordan (2007), countries that accumulate foreign exchange or its synthetic Jordan) at time 1990 < ≤ 2015. reserves during stable periods tend to recover faster Treatment is a dummy variable that takes the value from exogenous shocks than countries that do not 1 if belongs to Jordan and 0 if it belongs to Synthetic as reserves tend to smooth the adverse impact of Jordan. sudden reversals in foreign inflows. In other words, Post is a dummy variable that takes the value 1 if accumulating foreign reserves during tranquil the observation is after 2011 and 0 otherwise. periods acts as insurance against rapid inflow reversals during periods of turmoil. As such, the 65. Results show that the lost output as a result increase in the stock of foreign exchange reserves of the 2011 uprisings were further exacerbated by held at CBJ is recommended to buttress against the adverse events that followed. Coefficients of potential future shocks given the highly volatile interest are and : The former can be interpreted regional environment Jordan faces. as the economic impact of the Arab Spring during the event year (i.e. ), while the latter captures the 67. The government can also play a major role effect of any factors that might have negatively (or in spurring recovery through its macro policies. positively) impacted economic performance over the next four years. Table 9 reports the estimation 21 It is hard to disentangle the individual effect of each of these events as they have coincided with each other. Special Focus | 39 THE WORLD BANK According to the standard conception, sound low and has deteriorated over the past few years)22 policies following shocks (financial crises, civil wars is critical to spur the growth and employment that and currency crisis) are those that “can influence Jordan’s economy urgently needs. the reaction to the shock” (Bleaney, 1996, p. 465) by restoring macroeconomic stability, thus reducing uncertainty which correlates negatively with the level of productivity and investment (Fischer, 1993). Such policies include fiscal consolidation, inflation and exchange rate stability, among other things. 68. In addition to the above local factors, external conditions can have a major influence on a domestic economy following the recent events. Collier and Hoeffler (2004) argued that external aid has a considerable effect in boosting growth following post-instability situations. While the international community has been helping Jordan withstand the large influx of Syrian refugees since 2011, much effort is still needed. Another global link that might positively impact the pace of economic recovery is trade openness, particularly through higher exports. As argued by Elbadawi and Soto (2013) trade affects growth by increasing productivity, expanding markets and spreading technological innovation, among other things. In that spirit, the recent relaxed rules of origin deal signed with the EU is likely to increase exports and consequently speed-up the pace of economic recovery. 69. Lastly, Jordan can benefit from its highly educated population to recover. As suggested by Gennaioli et al. (2013), entrepreneurship is a main channel through which education boosts economic activity. In particular, highly skilled entrepreneurs tend to be innovative economic agents who are likely to find new ways of overcoming problems, hence boosting productivity, creating jobs and consequently helping the overall economy. Moreover, higher levels of education allow individuals to cope more efficiently with sudden changes in the economic environment. In the context of Jordan, the primary school enrollment, a widely used proxy for human capital, stood at 88.7 percent in 2012. This suggests, that if utilized efficiently, Jordanians are able to find new and productive ways to boost the economy. However, a weak business environment is preventing skilled labor from fully realizing its potential. As 22 Jordan’s ranking in the World Bank Group’s Doing Business such, improving the investment climate (which is rankings decreased from 107 in 2015 to 113 in 2016. 40 | Special Focus JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY Appendix Annex 3. List of Omitted Countries. Country Exogenous Schock After 2010 Bahrain Directly impacted by the Arab Spring since 2011 Côte d'Ivoire Impacted by the Second Civil War in 2011 Egypt, Arab Republic Directly impacted by the Arab Spring since 2011 Guinea Hit by Ebola in 2014 Honduras Honduras was affacted by the tropical storm Ernesto in 2012 Iraq Subject to multiple security shocks Islamic Republic of Iran Impacted by the sanctions imposed since 2012 on the energy and financial sectors Japan Hit by the Fukushima Daiichi nuclear disaster in 2011 Lebanon Indirectly impacted by the arab spring since 2011 Morocco Indirectly impacted by the arab spring since 2011 Thailand Hit by unprecedented floods in 2011 Tunisia Directly impacted by the Arab Spring since 2011 Ukraine Impacted by the conflict since 2011 West Bank and gaza Conflict with Israel Yemen Republic Directly impacted by the Arab Spring since 2011 Special Focus | 41 THE WORLD BANK investment and growth in developing countries. 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Proj. Real sector (annual percentage change, unless otherwise specified) Real GDP 2.8 3.1 2.4 2.3 2.6 3.1 Real GDP per Capita -0.3 0.3 0.0 0.3 0.9 1.7 Agriculture (share of GDP) 3.1 3.3 3.3 3.3 3.3 3.2 Industry (share of GDP) 25.0 25.2 25.2 25.2 25.2 25.1 Services (share of GDP) 56.0 55.8 55.9 55.7 56.0 56.1 Net taxes (share of GDP) 15.9 15.7 15.6 15.8 15.6 15.5 Money and prices (annual percentage change, unless otherwise specified) CPI Inflation (p.a) 4.8 2.9 -0.9 -0.7 2.8 2.9 Money (M2) 9.7 6.9 8.1 7.3 7.4 8.0 Investment & saving Total Investment 28.1 28.0 23.6 23.7 24.2 24.8 Gross National Savings 17.6 20.7 14.4 13.4 15.2 17.6 Government finance (percentage of GDP, unless otherwise specified) Total revenues and grants 24.1 28.6 25.5 26.4 26.8 27.0 Domestic Revenue (excluding grants and privatisation) 21.5 23.7 22.2 23.0 23.5 23.8 o/w. tax revenue 15.3 15.9 15.4 15.6 15.9 16.2 Foreign Grants 2.7 4.9 3.3 3.4 3.3 3.2 Total expenditure and net lending 35.7 37.9 29.1 30.0 30.8 30.8 Current1 31.4 33.4 25.0 25.8 26.5 26.5 o/w wages and salaries 5.0 4.9 4.7 4.7 4.5 4.5 o/w interest payment 3.1 3.6 3.4 3.5 3.6 3.7 o/w Transfer to utilities (NEPCO and WAJ) 6.0 7.0 0.1 0.0 0.0 0.0 Capital & Net Lending 4.3 4.5 4.1 4.2 4.3 4.3 Overall balance (deficit (-), excl. grants)2 -14.2 -14.2 -6.9 -7.0 -5.8 -3.6 Overall balance (deficit (-), incl. grants)2 -11.5 -9.3 -3.6 -3.5 -2.5 -0.5 Primary Balance (deficit (-), excl. grants)2 -11.1 -10.5 -3.5 -3.5 -2.2 0.1 Primary Balance (deficit (-), incl. grants)2 -8.4 -5.7 -0.1 -0.1 1.1 3.3 External sector (percentage of GDP, unless otherwise specified) Current Account -10.4 -7.3 -9.2 -10.3 -9.0 -7.2 Net Exports -29.6 -26.4 -22.9 -23.4 -21.9 -20.3 Export FOB 42.4 43.3 37.6 34.7 36.3 37.8 Import FOB 72.0 69.7 60.5 58.1 58.2 58.1 Net Income and transfers 19.2 19.1 13.7 13.1 12.9 13.1 Net Private Investments (FDI and Portfolio) 10.2 8.6 7.1 7.0 7.1 8.1 Gross Reserves3 (Months of Imports GNFS4) 5.9 6.7 7.5 7.2 7.1 7.2 Total Debt (in million US$, unless otherwise specified) Total Debt Stock 29,192 31,984 35,126 36,916 38,344 38,921 Debt to GDP Ratio (%)5 86.7 89.0 93.4 94.6 93.9 90.4 Memorandum Items: Nominal GDP (Billion JD) 23.9 25.4 26.6 27.6 28.9 30.5 GDP (in million US$) 33,679 35,917 37,612 ... ... ... Source: Government Data and World Bank Staff Calculation. Projections are as of 1 September 2016. 1 Includes adjustment to other receivables for 2012 (0.4% of GDP) and transfers to NEPCO and WAJ. As of 2015, NEPCO and WAJ reverted to government-guar- anteed borrowing from commercial banks. The government transferred 0.1 % of GDP to WAJ in 2015. 2 Includes fiscal gap of 1.5% of GDP in 2017 and 3.3% of GDP in 2018 3 Reserves exclude bank deposits in foreign currencies 4 GNFS: Goods and Non-Factor Services. 5 Government and guaranteed gross debt. Includes NEPCO and WAJ estimated borrowings for 2016-2018. 44 | Data Appendix JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY SELECTED SPECIAL FOCUS FROM RECENT JORDAN ECONOMIC MONITORS SPRING 2016 JEM: “THE FALL 2015 JEM: “A CHALLENGE AHEAD” HICCUP AMIDST Enhancing Municipal Service Delivery Amidst Urban SUSTAINED RESILIENCE Displacement in Jordan: (Special Focus) Responding to one of the largest refugee crisis in modern history, AND COMMITTED humanitarian agencies have played a colossal role in providing basic subsistence and protection for REFORMS” hundreds of thousands of Syrian refugees who sought refuge in Jordan. However, with eighty per cent of Tech startup ecosystem in Jordan: (Special Focus) refugees living in host communities, the pressure A new wave of entrepreneurship and innovation on local resources and services was mounting, is emerging in both developed and emerging underscoring the need for addressing capacity economies, spurred by digital entrepreneurs. gaps at the local level - something that could not Various developments, particularly those led by be sustained through a humanitarian response. The Information and Communications technology (ICT), Emergency Services and Social Resilience Program have reduced the cost of innovation and market (ESSRP) was launched as a multi-donor platform access substantially, allowing small tech businesses to meet this need. The Project proved critical in to compete with established industries. Today a helping local authorities cope with the social and startup can be created with just a laptop and Internet political risks associated with the refugee crisis and connection. This has led to the surge of tech startup served as an innovative approach to dealing with ecosystems worldwide, where communities of urban displacement. It also brought to the fore the entrepreneurs interact. Jordan in particular could challenges associated with working through a local benefit from this phenomenon, particularly for job government system that is constrained by systematic creation. Tech startup founders are predominantly inefficiencies and structural issues, undermining its university-educated, a factor that could alleviate responsiveness and highlighting the need for critical the country’s high unemployment rate among reforms. those with a college degree. The innovation that startups bring can also be beneficial to the country’s tech hub aspirations by making the sector more dynamic and sustainable. Jordan is no stranger to the tech ecosystem having spawned one of the most successful startups in the region; Maktoob. It now needs to leverage this early mover advantage by finding solutions to constraints like talent, space and funding that are hindering the development of its tech startup ecosystem. Selected Special Focus from Recent Jordan Economic Monitors | 45 THE WORLD BANK questions, World Bank staff developed an alternative SPRING 2015 JEM: method for estimating poverty by imputing household consumption data into the Employment- “PERSISTING FORWARD Unemployment Survey, which is conducted every quarter. This approach offers alternate annual poverty DESPITE CHALLENGES” estimates for Jordan. Based on this new approach, estimates for 2011 and 2012 point to a small decrease Access to Finance in Jordan: (Special Focus) Access in the poverty rate compared to 2010. Previous to finance is underdeveloped in Jordan where firms Bank research revealed, however, that a third of the rate their inability to receive credit as the second population lived below the poverty line in at least one overall obstacle to their operations. This status quarter of the year. Hence, while progress continues quo is of particular concern for micro-, small-, and in tackling chronic poverty, transient poverty affects a medium-sized enterprises (MSMEs), which make large swath of the population, which points to a large up over 90 percent of the Jordanian economy and share of vulnerable Jordanians. are major contributors to its competitiveness and employment potential. The situation has only worsened since 2006, with basic Access to Finance Syrian Refugees and Labor Market Outcomes in indicators deteriorating for firms across the country, Jordan: (Special Focus 2) A large influx of refugees of varying size and age, and in different sectors. The into a country occurring over a relatively short Jordanian authorities, including the Central Bank time is bound to have a major impact on the host of Jordan, have introduced several measures to country’s labor market. While in principle both improve access to finance but instrumental structural positive and negative impacts could arise from such reforms are still needed to instigate transformational a shock, ultimately the net impact on the Jordanian improvements across the board. labor market remains an empirical question. Official data are utilized to examine the impact on three labor market indicators – labor force participation, the employment rate and the unemployment rate - SPRING 2014 JEM: while accounting for economic activity through using construction permits as a control variable, at the level “RESILIENCE AMID of governorates. The Vector Autoregression (VAR) methodology has been adopted on panel data that TURMOIL” involves a cross-section of governorates in Jordan, during the time period Q4 2007 to Q3 2013. We Updating Poverty Estimates at Frequent Intervals: find evidence suggesting that the Syrian refugees Preliminary Results from Jordan: (Special Focus 1) are causing a reduction in the national labor force Jordan, not unlike many countries, relies on infrequent participation rate of Jordanians. Preliminary analysis household expenditure and income surveys (HEIS) to reveals this could be the result of refugees willing estimate poverty in the country. In Jordan, the last to work for relatively low wages, causing a large HEIS survey dates from 2010 so that the last official increase in discouraged Jordanian workers (as these poverty estimates is also from that year. When policy have a reservation wage that they perceive cannot be decisions are made in 2014, they are therefore based satisfied under the current environment and therefore on rather dated estimates of poverty. Not only has prefer to drop out of the labor force altogether; since Jordan suffered from a series of negative shocks, the these discouraged workers are no longer searching Government has also introduced major mitigation for jobs, they are not counted in the rank of the programs (e.g., the petroleum cash compensation unemployed). Given Jordan’s previously low labor transfer). Have these programs been successful force participation rate prior to the Syrian conflict, in protecting the poor? Is Jordan still progressing the recent drop in the participation rate is a source in its fight against poverty? To help answer these of concern. 46 | Selected Special Focus from Recent Jordan Economic Monitors JORDAN ECONOMIC MONITOR | REVIVING A SLOWING ECONOMY SELECTED RECENT WORLD BANK PUBLICATIONS ON JORDAN Title Publication Date Document Type Does improved local supply of schooling enhance intergenerational mobility 2016/09/15 Working Paper in education? evidence from Jordan Jordan - As-Samra wastewater plant expansion 2016/05/01 Brief Jordan - Queen Alia airport 2016/04/07 Brief Jordan - Tafila wind farm 2016/04/06 Brief The cost of irrigation water in the Jordan Valley 2016/04/01 Working Paper Learning or Leaning: Persistent and Transitory Spillovers from FDI 2016/03/02 Working Paper Plunging Oil Prices Bring Gains and Losses to the Middle East and North 2015/01/29 Press Release Africa Region Jordan Economic Monitor, Fall 2014: Steady and Moderate Growth Continues 2014/12/10 Report Jobs or Privileges: Unleashing the Employment Potential Of the Middle East 2014/11/01 Jordan Issue Brief and North Africa Doing Business 2015: going beyond efficiency – Jordan 2014/10/01 Working Paper Jordan Economic Monitor: Steady and moderate Growth continues 2014/04/01 Report Jordan Economic Monitor: Resilience amid turmoil 2014/04/01 Report Jordan country opinion survey report (July 2013 - June 2014) 2014/03/14 Working Paper Jordan Economic Monitor: Moderate Economic Activity With Significant 2013/10/31 Report Downside Risk Soft skills or hard cash?: the impact of training and wage subsidy programs on 2013/08/14 Brief female youth employment in Jordan Mitigate the Impact of Syrian Displacement on Jordan 2013/07/18 Loan Agreement Jordan Economic Monitor: Maintaining Stability and Fostering Shared 2013/06/25 Report Prosperity Amid Regional Turmoil Developing micro, small and medium enterprises in Jordan: the route to 2013/03/01 Brief shared prosperity (English) Do wage subsidies help young women get jobs? 2012/01/12 Brief Doing business 2013 : Jordan – smarter regulations for small and medium- 2012/23/10 Working Paper size enterprises : comparing business regulations for domestic firms in 185 economies Soft skills or hard cash? What works for female employment in Jordan? 2012/19/10 Working Paper The Patterns and determinants of household welfare growth in Jordan: 2002- 2012/01/10 Policy Research Working Paper 2010 PPIAF assistance in Jordan 2012/01/10 Brief Selected recent World Bank publications on Jordan | 47 0.9375 cm The World Bank www.worldbank.org/jo