Government Incentives Boost Revenues and Support Economic Growth

At the end of 2024, many experts were expecting weak economic results because of the Gaza war and lower public spending. But Jordan’s economy performed better than expected. Tax revenues increased by 165 million dinars compared to 2023. This rise wasn’t due to higher taxes, but because the government introduced smart economic measures—such as tax and customs exemptions, that encouraged businesses and markets to grow. These steps helped expand the tax base and increase revenues, even though they seemed like they would reduce income at first.

Jordan’s economy grew by 2.7 per cent in the fourth quarter of 2024, beating earlier forecasts of 2.5 per cent. This was also higher than the overall annual growth of 2.5 per cent, showing that the economy gained momentum by the end of the year. Other positive signs included foreign currency reserves rising to over $21 billion, dollarization dropping to 18.4 per cent, and inflation falling to 1.6 per cent. Inflation is expected to stay around 2 per cent in 2025.

This growth happened even while the region remained unstable. It shows that Jordan’s economy can handle challenges and still perform well. The early numbers are promising, but a closer look shows that the structure of the economy is also starting to change. The growth didn’t just come from people spending more or the government spending more, it also came from stronger performance in key productive sectors, which is a good sign for long-term growth.

One standout was agriculture, which grew by 8.4 per cent. This is surprising because agriculture has been overlooked for many years, even though it’s important for food security and reducing imports. This growth may be linked to government support, but for it to continue, the sector needs to become more efficient and profitable.

The manufacturing sector also did well, growing by 4.9 per cent and contributing the most to overall growth. This suggests that the sector is recovering, possibly thanks to smoother supply chains and government incentives. But to keep this up, more investment in technology and local production is needed, especially since the U.S. recently introduced new tariffs on Jordanian exports.

Other traditional sectors like mining, electricity, and water also grew steadily, helping support the economy. However, service sectors such as tourism and restaurants grew more slowly—just 3.1 per cent—even though tourism improved slightly and the health situation was stable.

When we look at what drove growth, commodity sectors (like agriculture and manufacturing) added 1.6 points to overall growth, while service sectors added only 1.1 points. This shows the economy is shifting away from relying too much on services, which are often more vulnerable to outside shocks.

In terms of their share in the economy, manufacturing remains the biggest contributor at 18.7 per cent, followed by financial and real estate services at 17.2 per cent. These numbers are good, but they raise questions about whether these sectors can create enough good jobs for Jordanians.

The last quarter of 2024 showed clear signs that Jordan’s economy is moving in a better direction. It proves that smart, flexible economic decisions can make a big difference. But there is still work to do, Jordan needs to speed up reforms, grow new industries, and boost competitiveness. Growth is good, but it must lead to better living standards, higher productivity, and more jobs for it to truly make a difference.

Raad Mahmoud Al Tal is head of the Economics Department – University of Jordan-  [email protected]