Amidst a challenging regional backdrop, Jordan¡¯s economy remains sluggish, though it is undergoing a modest pick-up in 2017, owing to a resurgence in tourism and mining and quarrying. Yet this is overlaid on continued uncertainty regarding the crises in Syria and Iraq, and the duration of the slowdown in the Gulf Cooperation Council (GCC) countries on the one hand, and the slow pace of structural reforms on the other.
Recent Developments
Real GDP growth for 2017 is expected to be 2.3 percent, a tepid increase of 0.3 percentage points (pp) over the 2016 rate. Services continued to be the principal driver of GDP growth in 2017 propelled by a robust performance in tourism, which posted double digit growth in receipts and arrivals in the first half of the year. The tourism sector has more than made up for the declines from GCC countries by attracting visitors from other parts of the world, especially Asia. Jordan¡¯s industrial sector is regaining momentum based on a recovery in mining and quarrying, which grew by 14.7 percent in the first quarter of 2017 (Q1-2017) in contrast to a contraction of 8.4 percent yoy in Q1-2016. Because of these developments, and a resurgence in potash prices, net exports of goods and services are projected to lead GDP growth on the demand side, as they did in 2016. Structurally, while industry accounts for one quarter of GDP, it provides the main source of buoyancy in GDP growth.
In 2017, Jordan¡¯s fiscal position is expected to improve as a result of the government¡¯s fiscal consolidation efforts in line with the International Monetary Fund program. However, the narrowing of fiscal imbalances is likely to materialize at a slower pace than initially anticipated by the program due to weaker economic growth. The projected overall fiscal deficit, excluding (including) grants, will be largely unvaried from 2016 levels at 6 (3.3) percent of GDP. On the external front, despite a larger energy import bill reflecting higher international oil prices, the large current account deficit is expected to narrow driven mainly by the growth in tourism.
