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Jordan¡¯s Economic Outlook- October 2016

Jordan¡¯s economic growth has been subdued in the last year as spillovers from regional instability take a toll with unemployment reaching a recent high. Nevertheless, growth is projected to average 2.7% over 2016-2018 on the back of implementation of the Jordan Compact and planned reforms to stimulate the labor market and improve the business climate. A new IMF program supports related reforms and containment of the fiscal deficit.

Outlook

Jordan¡¯s economic growth is expected to remain flat at 2.3% in 2016 and improve in the medium term to 3.1% in 2018, closer to but still below Jordan¡¯s potential. The outlook assumes no further deterioration of security spillovers in and around Jordan. Further, confidence in the macroeconomic framework is forecasted to strengthen due to the IMF agreement. The primary fiscal balance is projected to move into surplus in 2017, coinciding with a reversal in the hitherto increasing gross debt-to-GDP ratio. Pressures on the external account are expected to subdue as of 2017 with a pick-up in exports and investment due to diversification efforts and the opportunities afforded by the EU¡¯s ROO relaxation and energy supply diversification plans, as well as stabilization of remittances and travel receipts. Despite expectations of higher oil prices and resulting higher energy imports, the current account deficit is expected to narrow from 2017. The next round of HEIS necessary to estimate poverty is expected to be implemented in 2017/18. ľ¹ÏÓ°Ôº is providing technical assistance to support the design and implementation of this survey.

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