Jordan¡¯s economic rebound during 2021 has been steady, reaching 2.1% in the first nine months of 2021, led by a broad-based recovery of the services and industrial sectors. Yet, unemployment remains persistently high, particularly for youth, while labor force participation is among the lowest regionally. The current account deficit remains elevated, but the fiscal position is showing tangible improvement. Headline inflation remains low despite increases in transport and fuel prices. Going forward, economic growth is projected to remain modest as both the direct and indirect impacts of the war in Ukraine and associated sanctions unfold, creating headwinds for Jordan¡¯s nascent economic recovery.
Recent Developments
Economic recovery during the first nine months of 2021 was steady but was slightly below expectation. Jordan's growth reached 2.1% in 9M-2021 year-on-year, led by a broad-based recovery of the services and industrial sectors. Nonetheless, performance of some sub-sectors, specifically contact-intensive services, remain below pre-pandemic levels. The fiscal position showed notable improvement vis-¨¤-vis 2020. Central Government (CG) fiscal deficit (including grants) as of 11M-2021 stood at 4.6%of GDP, a 1.5 percentage point lower than in 2020. A strong recovery in domestic revenue collection contributed to the significant improvement, which more than offset elevated spending.
Outlook
Growth is projected to reach 2% and 2.1%in 2021 and 2022 respectively, led by a recovery in domestic demand and supportive government policies. On the supply side, acceleration in the recovery of tourism and services are expected to boost the economy. Growth dynamics over the medium-term, however, hinge on global economic conditions, headwinds from the war in Ukraine and associated sanctions and timely implementation of key reforms to address structural challenges. Reflecting elevated international commodity prices, headline inflation during 2022 is projected to reach 3.3%.