High debt levels and persistent unemployment continue to plague growth prospects
Firms are advised to maintain mediocre performance expectations in Jordan for 2024 amid strong headwinds and lack of economically stimulating policies. B2C MNCs can expect price sensitivity to linger, particularly as lower- and middle-income consumers bear the brunt of austerity measures and unemployment rates remain high. B2B MNCs should monitor for increased investments in high-value industries, such as manufacturing and tourism, while being mindful of slow growth in investment levels. Expect to see heightened risk of operational and route-to-market disruptions if further austerity measures are announced, which could fuel civil unrest.
Overview
- Signs of disinflation in Jordan appear to be driven by cooling food and energy prices, with headline inflation falling to 0.92% in July 2023, from over 5% in Q4 2022.
- Despite producer prices falling by 7.5% YOY in Q1, they remain well above pre-2022 levels.
- Public debt has risen significantly, reaching around 114.7% of GDP by the end of 2022, with around US$ 4.23 billion in debt due to water subsidies.
- Total unemployment hit 21.9% YOY in Q1 2023, with youth unemployment at a staggering 46.1%.
- The government has adopted an economic modernization plan that lays out a roadmap for major business environment reforms in the next 10 years and covers many sectors, including tourism, high-tech, and agriculture.
- Jordan’s 2023 budget forecasts JOD 11.4 billion (US$ 16 billion) in expenditures, with revenues set at JOD 9.6 billion, an 8% increase.
Our View
Economic growth will remain anaemic in Jordan in 2024. The tourism sector will be the main driver of overall growth, while weak public finances and persistently high unemployment will continue to limit growth potential. Structural difficulties in the country’s business environment, such as steep energy costs and bureaucratic obstacles, will likely persist. While the suggested economic roadmap provides a clear avenue for growth acceleration, progress will likely be gradual. FrontierView expects GDP growth to average 2.2% YOY in 2023 and 2.4% YOY in 2024.
- Public spending outlook: Rising levels of external debt service continue to burden Jordan’s foreign currency reserves and limit the government’s fiscal capabilities. High levels of spending on public sector salaries (salary increases total JOD 312 million in the new budget) will likely be maintained in 2024, consequently limiting government spending growth. Progress on combating tax evasion will allow the government to increase revenues in the medium term; however, the impact on government spending will likely remain limited in the short term.
- Consumer outlook: Consumer spending growth will be gradual in 2024. An increase in tourist arrivals will be the main growth driver, with a better-performing tourism sector translating into increased employment opportunities. However, persistently high unemployment, coupled with a spike in prices as subsidies such as fuel and bread are eased, will weigh on purchasing power. FrontierView expects consumer spending growth to average 2% YOY in 2024.
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