Jordan: What is the Jordanian economic situation in the face of the Gaza war?

Household consumption is down (boycott, low morale, etc.) and national exports have fallen sharply since the beginning of 2024 (-14.8% y/y in Q1). First and foremost, tourism, which contributes 15% to GDP, has slowed considerably: the number of visitors decreased, y/y, by -6.6% in Q4 2023 and by -9.7% in Q1 2024.

However, Jordan has been able to adapt and diversify quickly.

Faced with disruptions to trade routes and risks to its supply chains, it has, for example, turned to Brazil for its potash exports, and to Qatar and the United States for its LNG imports.

In the same vein, tourism revenues increased by +27.4% in 2023, contributing to an increase in the service surplus of almost +70%. The decline in tourist arrivals from Europe and the United States after the start of the war was partly offset by an increase in tourists from the Gulf countries (+18.7% in Q4 2023 and +34% in Q1 2024), which generate more revenue.

The current account deficit unexpectedly narrowed sharply in 2023 to -3.5% of GDP, compared to -7.9% of GDP in 2022, while in line with rising tourism revenues, the trade deficit decreased by -9% y/y and Jordanian expatriate remittances increased by +1.4%. The current account deficit is expected to widen again in 2024 to reach 5% of GDP, but remains well below previous levels.

In Q1, the trade deficit increased by +5.8% compared to Q1 2023 and tourism revenues decreased by -5.6%. Jordanian expatriate remittances, however, are up by +4.2%.

The IMF does anticipate a slowdown in growth, which should reach 2.6% in 2023 and 2.4% in 2024, but these rates remain in line with those recorded over the last decade.

Inflation has also remained contained, with an average rate of 2.1% in 2023 and 1.7% in Q1 2024, despite the sharp rise in freight costs and even though the Kingdom imports 95% of its basic products. Jordan has indeed implemented measures to limit the rise in food prices as well as exemptions from customs duties and taxes on maritime freight.

Foreign exchange reserves reached a record level: USD 19.1 billion at the end of April, sufficient to cover 8.3 months of imports of goods and services.

The rating agencies have renewed their confidence in the Jordanian economy and its ability to absorb external shocks.

In May, Moody’s even upgraded Jordan’s long-term credit rating from “B1” to “Ba3”, with a stable outlook, highlighting the effectiveness of fiscal, monetary and economic risk mitigation policies.

Source: French Embassy in Jordan