Outlook for 2011-15
Despite regional and domestic unrest, power in Jordan is expected to remain firmly in the hands of the king, Abdullah II, who will retain the loyal support of the army and the security services.
The new government, appointed in response to popular demonstrations in January and already facing opposition, will attempt to balance tactical political concessions with its long-standing priority of economic reform.
Jordan's fiscal deficit is expected to remain wide over the forecast period. It will average 6.2% of GDP a year (including grants), with recent spending pledges partly offset by increased foreign grants.
The Central Bank of Jordan is unlikely to raise rates until at least the second half of 2012, in an effort to encourage commercial bank lending.
Although it will recover over the forecast period, real GDP growth is likely to remain below the highs of 2004-08, as the economy struggles because of limited public spending growth and the end of the construction boom.
The Economist Intelligence Unit forecasts that real GDP in 2011 will grow by 3.3%, less than previously expected, as regional unrest limits foreign direct investment and restricts the expansion of the tourism sector.
Average inflation is expected to rise to 6.4% in 2011, in line with higher global commodity prices. Overall, we expect inflation to average 5.2% in 2011-15.
A group of salafis, mimicking the recent trend for demonstrations in Jordan, has led a protest in Zarqa demanding the release of imprisoned members, which became violent and caused 80 police injuries.
Taher Masri, the head of the National Dialogue Committee, has said that a new political reform plan will be finalised shortly. A mixed electoral law, combining the existing one-person-one vote system with party lists, is likely.
Public-sector strikes have pressured the government to raise salaries, but it was announced doing so may cost Jordan's stretched budget JD100m.
A World Bank team has praised the government's fiscal consolidation programme while visiting Jordan and suggested that the economy is recovering. They expect 3-4% growth in 2011, similar to the our forecast.
Regional unrest has affected tourism with a key site, Petra, reporting a near 50% decline in visitors in March 2011. Domestic bookings have risen, though.
The Jordan Red Sea Project, aimed at solving the country's water needs, has announced the pre-qualification of six consortia to act as master developer. Offers are due by September 2011 and phase one will be completed by 2018.
Source: Country Report
This report covers the following industry codes:
SIC Code: 65;10;89;70
NAICS Code: 53;212;56;72
Country Report Jordan May 2011: published 5/11/2011 is available at:
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