From recession to stimulus: reshaping the Jordanian economy

The Jordanian economy is going through a critical time. After 15 months of conflict in Gaza, which affected the economy of Jordan and the whole region, a new US government decided to stop aid for three months to review it. This comes at a time when Jordan’s economy faces growing challenges that need clear plans to adjust to changes in the region and globally.

The government’s policies and plans will shape the future of the economy and determine if it can grow and improve. The economic and financial policies that deal with current challenges are very important because they will help ensure stability in the economy in the medium and long term.

Postponing crises is no longer possible. The Prime Minister Jafar Hassan is focused on solving crises, not delaying them, and there is no time to delay anymore. Over the last few years, Jordan and the region have faced many challenges and crises that have impacted our economy.

In the past ten years, Jordan’s economy has faced several internal shocks that caused big changes. In terms of supply, the real estate sector became the second largest part of economic growth after manufacturing, contributing 0.28 per cent , or 12.2 per cent  of the total economic growth of 2.3 per cent from 2009 to 2021, ahead of key sectors like transport and trade.

The main problem with these changes is that the sectors leading the economy do not add enough value, and there is an imbalance in the workforce between local and foreign workers. More than half of the workers in construction are foreign, two-thirds of workers in agriculture are foreign, and a quarter of workers in industry and trade are foreign. At the same time, Jordan exports skilled workers and imports unskilled ones, which causes a lack of skilled workers locally and high unemployment for unskilled workers.

On the demand side, the arrival of around 1.3 million Syrian refugees increased private consumption. This led to higher spending by individuals, while government and investment spending decreased. However, the contribution of exports to GDP improved. It’s important to diversify the economy and strengthen productive sectors to create more value and help the economy produce goods and services for export, leading to more sustainable growth.

In 2024, Jordan’s economy showed some key economic figures. Inflation was 1.56 per cent  from January to December. The budget deficit, after grants, reached -6.3 per cent of GDP by November 2024. The economy grew by 2.4 per cent  from January to September 2024. The current account deficit was -7.7 per cent  of GDP in the same period. Foreign reserves reached 21 billion dollars by the end of December 2024. Public debt was 44.5 billion dinars by November 2024, showing the financial challenges the country faces.

The structural challenges facing Jordan’s economy are one of the biggest obstacles to improving growth and breaking the 2 per cent  growth rate. The Jordanian economy has the potential to grow faster than this, but reaching that goal needs continuous efforts to make necessary economic reforms and increase economic diversity. By focusing on developing sectors like technology and renewable energy, Jordan can boost its exports and reduce its dependence on traditional industries. Investing in people, improving the work environment, and offering more training and education for workers will help make the local market more efficient, reduce unemployment and improve efficiency in the economy.

Author is a head of the Economics Department – University of Jordan