The war is having spillover effects on Jordan’s economy
Escalating tensions and violence in Gaza will weaken overall private consumption in Jordan through Q1 2024 at least. B2C multinationals can expect weak demand in Q1 2024 as tourism remains sluggish and inflationary pressures increase. Route-to-market disruptions in Amman may increase if protests continue to escalate. While foreign aid inflows will continue to be maintained, private sector investment sentiment toward Jordan may weaken in the medium term should the war persist over the coming weeks. Businesses can expect to see increased delivery times and higher logistics costs for the next few months.
Overview
- Tourism Sector: The war continues to have negative spillover effects on Jordan’s tourism sector. Hotel bookings have not reached more than 10–15% of their capacity in most areas since the start of the year, with some not even registering any new bookings. Several international airlines have kept flights to Jordan suspended. Alongside this, the government has announced it aims to implement measures to boost domestic and regional tourism, notably from markets in Asia and Africa.
- Red Sea: Jordan’s economy has not been immune to escalations in the Red Sea: the port of Aqaba receives nearly one-third of its imports through the Red Sea, also using it for more than 50% of its exports. Jordan is also one of the world’s largest exporters of potash and phosphate fertilizers—commodities that make up 17% of national exports and around 3% of GDP. An estimated 76% of potash output leaves the country through the Aqaba port. Aqaba also hosts Jordan’s only container port, which acts as a crucial hub for transit to elsewhere in the region. FrontierView expects Red Sea disruptions to last until April 2024 at least, impacting Jordanian exports and imports and likely to result in inflationary pressures through H1 2024.
- Ties with Israel: Jordan has maintained a firm position against the possibility of a Palestinian exodus into the country. Foreign Minister Ayman Safadi has also voiced support for South Africa’s genocide case against Israel at the UN’s top court, stating that Amman was ready to submit legal documents and appear in court if the case proceeds. Protests have also continued in recent weeks, with thousands of Jordanians taking to the streets last week in Amman, Tafileh, Maan and Aqaba. Without a meaningful de-escalation from the extremist, right-wing government in Tel Aviv, diplomatic relations are likely to continue deteriorating in the coming period. Pressures to cancel Jordan’s gas agreement with Israel will continue to grow, with the former already moving to source new energy agreements, hoping to divert reliance away from Israeli gas in the future.
Our View
Pro-Palestine protests will continue throughout Jordan in the coming months. The tourism sector will continue to see a significant slump throughout Q1 2024 at least, as security concerns remain elevated. While tourist arrivals from the region may see a slight uptick in Q2 2024, tourism inflows from the West will remain subdued throughout the year. While foreign aid inflows will continue, the risk of a slowdown in private investments is growing, as regional tensions continue to escalate. A significant drop in tourism revenues, coupled with a prolonged suspension of Red Sea shipping by operators, is likely to worsen Jordan’s balance-of-payments position, with both businesses and consumers continuing to feel the weight of targeted trade routes throughout Q1 2024 at least.
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