Jordan’s economy has weathered the COVID-19 shock better than many peers. Yet high unemployment (particularly among youth at 48%), widening external imbalances, rising debt, and low levels of investment pose significant challenges to a robust recovery. Jordan needs to stay the course on reforms to promote investment-led growth and job creation.
Recent Developments
During February to May 2021, Jordan experienced one of the strongest COVID-19 waves since the beginning of the pandemic, leading to a modest 0.3% real GDP growth in Q1-2021. This timid growth, however, surpassed expectations considering the sharp drop in tourism and social distancing measures imposed during this time. A contributing factor to the better-than-expected performance was the GOJ’s timely fiscal and monetary stimuli as well as support programs for poor and vulnerable households as well as workers and firms impacted by the crisis. Debt remains a key challenge: Jordan’s Central Government debt-to-GDP ratio at end-May 2021 stood at 109%, almost on par with end-2020.
Outlook
Although early indicators point to some output recovery (such as real estate sales, construction activity and industrial production), Jordan’s private sector may not be able to galvanize quickly, while the government is contending with lack of fiscal space. Hence, the rebound of the economy is expected to be gradual in the next few years. Once global recovery consolidates, vaccination expands, and tourism recovers, growth is projected to average around 2.3%, consistent with the pre-pandemic performance.