Jordan: Reforms Critical to Resilient Recovery and Sustainable Growth

Amman —Accelerated global recovery, improved vaccine rollout, and a full reopening of the domestic economy are the main drivers of a projected growth rate of 2.2% for this year in Jordan, according to the World Bank. However, rising COVID cases in some parts of the world, the slow pace of recovery of international tourism, and the new COVID variant remain major downside risks.

The World Bank’s Fall 2021 edition of the Jordan Economic Monitor (JEM), ,En Route to Recovery puts Jordan’s economic recovery at 1.8% for the first half of 2021, following a moderate contraction of 1.6% in 2020. Recovery has been led by the service and industrial sectors, even though the performance of some sub-sectors remains below pre-pandemic levels. The pandemic has amplified unemployment, which rose from 19% before the pandemic to 24.8% in the second quarter of 2021.

Fiscal and monetary policies have continued to play a critically supportive role despite a challenging global environment. During the first seven months of 2021, domestic revenue registered robust growth, supported by a rebound in economic activity, surge in imports, and tax administration measures. This has helped the Government of Jordan remain on a path to fiscal consolidation. Accommodative monetary policies and an output gap have also aided recovery and kept inflation low.

Although Jordan’s external sector remain under pressure, reflecting the impact of unfavorable terms of trade (specifically rising global commodity prices) and improved domestic demand, the country’s Central Bank reserves increased by almost US$1 billion between end-December 2020 and September 2021, aided by supportive monetary policy and external financing.

The JEM includes two special focus sections, Measuring Jordan’s comprehensive wealth using a Wealth of Nations Approach, and Public Transportation Challenges in Jordan. The first presents a broad-based assessment of the country’s national wealth from 1995 to 2018, based on the World Bank’s Wealth of Nations methodology, and reveals that per capita the gap between Jordan and upper middle-income countries has been widening. The section stresses the need for Jordan to diversify its national wealth portfolio, reverse the declining share of human capital in its economy, and increase its stock of capital.

The second special focus section discusses the challenges Jordanians face in public transportation that have led to low ridership and limited access, particularly for women, youth, and people with disabilities. The report outlines policy reforms that could improve Jordan’s public transport system and trigger a shift away from the use of private cars. Transportation connectivity and inclusive and sustainable growth are inextricably bound with each other. Public transportation enhancement is a key enabler of economic growth by, among other, generating employment and reducing energy consumption and pollutant emissions.

“Jordan has done well to respond to the ongoing pandemic crisis through rapid social assistance to the poor and vulnerable, timely support to small businesses, and continued push to accelerate economic and structural reforms,” said Saroj Kumar Jha, World Bank Mashreq Regional Director. “In order to realize the full potential of all Jordanians, especially women and youth, Jordan will need to prioritize addressing the challenges of the public transportation system to ensure safe, accessible and affordable transportation.”

While Jordan’s government is moving in the right direction to improve public transport, more action is needed to advance reforms to the public transport sector in a transparent and consultative manner together with the private sector and civil society and focusing squarely on the goal of effecting a modal shift from private cars to public transportation.

 

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