Economy

Jordan’s growth to moderate this year but pick up by 2026

By Pramod Kumar

September 9, 2024, 4:05 AM

The red sands and rock formations of Wadi Rum are a unique Jordan attraction. Tourism contributed 15% to Jordan's GDP in 2023

Jordan’s economic growth is expected to moderate to 2.3 percent this year due to the indirect impacts of the increase in regional tensions, which have hit investment and tourism numbers.

However, the growth is expected to rebound toward 3 percent by 2026-2027 as the economy adapts to the initial shock of regional instability.

“Authorities’ efforts to improve Jordan’s competitiveness and foster a better business environment are ongoing, and we expect they will eventually support headline GDP growth,” rating agency S&P said.

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S&P upgraded Jordan’s long-term foreign and local currency sovereign credit ratings to “BB-“from “B+”, with a stable outlook.

A shift in consumer behaviour has been observed, with increased preference for domestically produced goods amid a boycott of international brands perceived to have ties to Israel.

International financial support for Jordan is expected to remain strong. Given the country’s location between Israel and other Middle Eastern states, the US and the Gulf Cooperation Council will likely maintain Jordan’s stability as an important foreign policy objective.

Under the current memorandum of understanding between Jordan and the US for 2023-2029, the latter has committed $1.45 billion in annual budgetary and military support. The rating agency expects the US to continue these supplementary grants.

The government deficit is forecast to narrow, with the balance approaching zero through 2027. Nonetheless, the government had to scale back expenditure to achieve its 2023 outcome.

“We project Jordan’s consolidated government deficit will stabilise this year at 1.8 percent of GDP before narrowing,” the rating agency said.

Lower oil prices have reduced Jordan’s current account deficit to 3.7 percent of GDP in 2023, the lowest level since 2019. Last year’s record tourism performance – despite a softening in the latter part of the year – helped offset declines in grants and remittances.

Jordan’s external balances will be contained as oil prices are anticipated to stay broadly flat in the coming years and a pickup in investment-linked imports over 2024-2027.

Tourism, which contributed 15 percent to GDP in 2023, will probably slow down amid regional tensions. Only one-quarter of tourism income comes from non-Arab visitors.