'Jordan’s growth during first half of 2022 exceeded expectations'

AMMAN —  Despite a challenging global environment, Jordan’s growth during the first half of 2022 exceeded expectations, buoyed by a strong rebound in tourism and exports, according to the World Bank’s economic monitor report.

Jordan’s real GDP accelerated to 2.7 per cent in the first half of 2022, said the World Bank’s latest edition of the Jordan Economic Monitor (JEM) Fall 2022 titled: "Public Investment: Maximising the Development Impact".

This upswing was propelled by a strong recovery of international tourism to Jordan, the full reopening of the economy, the easing of COVID-related restrictions and improving exports. The services sector was the strongest contributor to growth with a robust rebound in contact-intensive services, followed by the industrial sector, the report said.

However, the rebound in growth was only modestly reflected on labour market indicators, the report said, highlighting need to increase resilience and support recovery, structural reforms need to be accelerated to address the long-standing impediments to private sector-led growth.

The economic monitor report also noted that external economic conditions have deteriorated due to the global food and fuel crisis. 

Export growth in Jordan was robust (44 per cent in the first half of 2022), but the increase in the imports bill and a wider current account deficit led to sustained pressures on the balance of payments, the report said.

 Inflation has also reached its highest level since 2018 but remains contained compared to regional peers. On the fiscal front, while domestic revenue collection continued to improve as a result of the economic recovery and efforts to broaden the tax base, higher revenues were outpaced by greater public spending, the World Bank observed.

“Jordan’s economy has been severely impacted by the challenging global context, notably the increase in global commodity prices,” said Jean-Christophe Carret, World Bank Mashreq Country director. “In an effort to increase resilience and support economic recovery, the Government of Jordan adopted several measures to mitigate the impact on consumers and businesses, particularly vulnerable households and workers. Yet going forward, a faster pace of reforms is critical to unlock Jordan’s growth potential and for inclusive job creation, particularly for women and youth.”

The Fall 2022 JEM recommended focusing future domestic policy measures on building resilience and cushioning the impact of global risk factors, through 1) the acceleration of structural reforms and improving long-term fiscal sustainability; this also requires mitigating fiscal pressures from SOEs, notably in the energy and water sector and, 2) the adoption of deep labour market reforms to overcome labour market segmentation and unlock Jordan’s human capital potential. 

Over the medium term, a more challenging global environment and higher borrowing costs will warrant a more cautious fiscal consolidation trajectory to ensure that a primary surplus can be achieved by 2025, according to the report.

The Special Focus Section of the JEM highlights the role of public investment as a driver of growth, with a focus on recent trends, and the efficiency and effectiveness of capital spending. This is particularly relevant given Jordan’s limited fiscal space. Public investment spending in Jordan has steadily declined during the past two decades to reduce the fiscal deficit, but also due to consistent under-spending compared to the budget and insufficient allocations for operation and maintenance costs.

“Jordan has made important progress in improving the institutional and implementation framework for public investment. Given the importance of public and private investment for realising the [Economic Modernisation] Vision 2033, it will be critical to maximise the efficiency of public investment; this requires strategic, long-term planning based on realistic financing assumptions as well as transparent project selection,” said Hoda Youssef, World Bank senior country economist.

With Jordan being highly vulnerable to climate change and extreme weather conditions, purposefully integrating climate concerns in public (and private) investments would also advance the Kingdom’s achievement of its climate targets and promote a transformation towards a greener economy, in line with the Economic Modernisation Vision 2033, the WB economic monitor report said.