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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 AMMAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Economic and Political Environment King Abdullah II upon ascending to the throne following his father's death in 1999, has provided re-energized economic leadership. King Abdullah, II bin Al-Hussein has proven to be a steadfast proponent of an invigorated program of economic reforms that includes privatization, structural and procedural changes that attract foreign investment and enable foreign debt restructuring and reduction. He also believes that efforts should be continued to build a modern Jordan that provides its men and women with opportunities for a decent life and ensures that the gains of development are distributed equally among the people. King Abdullah belongs to a new generation of Western-educated Arab leaders. The king's political agenda has been focused on economic revival, greater political openness, social justice and equality, in order to clearly place Jordan actively on the regional and international map. While keeping the warm ties with the West nurtured by his father, he has succeeded in improving ties with Syria and the Palestinians and cementing links with Saudi Arabia and Kuwait. Economic Performance The real GDP growth by end of 2005 was 7.2% compared to 7.7% for 2004. The pickup was due to a huge jump in exports as external demand grew, especially from the United States. By the end of the year 2005, exports grew by 10.3% to reach U$ 4.3 billion. Jordan conducts its monetary policy with a fixed peg to the U.S. dollar and believes that its trade performance indicates that policy still provides for good international competitiveness of its exports. In the past few years, it has also resulted in virtual stability in the price level with inflation as measured by both the GDP deflator and the CPI. Meanwhile, CPI inflation at the end of June of 2006 was 6.2%, compared with 3.5% in 2005. As for the fiscal policy performance, re-estimated figures indicate an increase of 19.3% in domestic revenues in 2005 as compared to the 2004, and a rise of 11.3% in public expenditure, putting the fiscal deficit at 5.2% of the GDP. Jordan's main export commodities are phosphates, fertilizers, potash, agricultural products and textiles. Its main imports include crude oil, machinery, transport equipment, food, live animals and manufactured goods. By end of June 2006, exports (exports and re-exports) grew by 11.5%, and imports increased by 13.5%. Foreign direct investment (FDI) has been increased steadily in recent years. By the end of March 2006, it reached US$ 1,201 million compared to US$ 383 million for the same period in 2005. Jordan's gross international reserves have been rising steadily over the past several years, and at the of June 2006, these reserves stood at more than US$ 4.9 billion, equivalent to the value of seven months' merchandise imports. Privatization has moved along quite well. The centerpiece of the program was the sale of a large minority ownership (along with management control) in Jordan Telecom to France Telecom. Recently, the government sold its stake in Jordan Telecom to some institutional investors and offered 2.5% of the company’s shares through an IPO. Also the government sold 37% of its stake in the Jordan Phosphate Mines and sold 80% of the Royal Jordanian Investment. Many projects are in the pipeline such as Jordan Post Company, Jordan Mills Company, and Jordan Agricultural Marketing and Processing Company. Furthermore, many privatization actions are taking place in the field of aviation, power, transportation, and mining.* * Amman Stock Exchange. Key Information Contacts Jordan Securities Commission www.jsc.gov.jo Securities Depository Center www.sdc.com.jo Jordan Investment Board www.jordaninvestment.com Arab Monetary Fund www.amf.org.ae Ministry of Finance www.mof.gov.jo Central Bank of Jordan (CBJ) www.cbj.gov.jo National Information Center www.nic.gov.jo ECONOMIC RATIOS Jordan Lower-middle-income group GROWTH OF INVESTMENT AND GDP (%) GDI GDP Trade 10 5 Domestic savings Investment 0 -5 97 98 99 00 01 02 03 04 05 -10 Indebtedness -15 PAGE 36
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 AMMAN STOCK EXCHANGE JORDAN GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture 3.0 6.4 Industry 25.0 25.0 Services 72.0 68.6 JORDAN MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES 1998 1999 2000 2001 2002 2003 2004 2005 2006* Money Supply M1 (dinars-billions) 1,613.9 1,777.1 2,026.7 2,119.7 2,316.2 2,919.8 3,192.9 4,061.3 4,423.2 Money Supply M2 (dinars-billions) 6,026.3 6,747.6 7,434.7 7,866.1 8,419.1 9,465.7 10,571.4 12,364 13,260.5 Growth Rate M1 -1.7% 10.1% 14.0% 4.6% 9.3% 26.1% 9.4% 27.2% 8.9% Growth Rate M2 8.1% 12.0% 10.2% 5.8% 7.0% 12.4% 11.7% 17.0% 3.1% Interest Rates deposit rates 8.3% 7.9% 6.6% 5.2% 4.0% 2.8% 2.5% 3.5% 4.5% lending rate 12.9% 12.7% 11.4% 10.5% 9.9% 8.9% 7.6% 8.1% 8.0% Foreign Exchange Reserves (US$ millions) 1,750 2,629 2,763 2,578 3,495 4,739.5 4,824.2 4,743.9 4,907.9 Exchange Rate Period Average (dinars/US$) 0.709 0.709 0.709 0.709 0.709 0.709 0.709 0.709 0.709 Annual % Growth 0 0 0 0 0 0 0 0 0 GROWTH OF EXPORTS AND IMPORTS (%) INFLATION (%) Exports Imports GDP deflator CPI 50 6 40 5 30 20 10 0 4 3 2 1 0 -10 97 98 99 00 01 02 03 04 05 -1 97 98 99 00 01 02 03 04 05 EXPORT AND IMPORT LEVELS (US$ Millions) CURRENT ACCOUNT BALANCE TO GDP (%) Exports Imports 9,000 6,000 3,000 0 97 98 99 00 01 02 03 04 12 10 8 6 4 2 0 -2 97 98 99 00 01 02 03 04 * World Bank reports PAGE 37
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