April 2011 - Malnor

thousands of protestors had been out on the streets of
Jordan’s cities, angry over a stagnant economy, upset
with government corruption and demanding that senior
political leaders resign.
Recent economic highlights
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Jordan’s economy is among the smallest in the Middle
East, with insufficient supplies of water, oil and other
natural resources, underlying the government’s heavy
reliance on foreign assistance. Jordan is ranked among
the five most water poor countries in the world. Because
of short supply of water many households receive water
only once or twice a week. Poor connections and leaking
pipes mean that even available water does not always
reach some homes and businesses.
Other economic challenges for the government include
high rates of poverty and unemployment, with an
estimated 12% of the population unemployed and 25%
living in poverty, as well as inflation and a large budget
deficit. King Abdallah has implemented significant
economic reforms such as opening the trade regime,
privatising state-owned companies and eliminating most
fuel subsidies, which in the past few years have spurred
economic growth by attracting foreign investment and
creating some jobs.
Food prices increased by 15% between October 2010
and January 2011; this could lead to a higher cost of
living and a rise in poverty levels since Jordan imports
over 90% of its food needs.
The global economic slowdown has depressed Jordan’s
GDP growth. Export-oriented sectors such as
manufacturing, mining and the transport of re-exports
have been hit the hardest. The Government approved
two supplementary budgets in 2010, but sweeping tax
cuts planned for 2010 did not materialise because of
Amman’s need for additional revenue to cover excess
spending. The budget deficit is likely to remain high with
Amman continuing to depend heavily on foreign
assistance to finance the deficit in 2011. Jordan’s
financial sector has been relatively isolated from the
international financial crisis because of its limited
exposure to overseas capital markets.
Due to the unrest in the region, Finance Minister
Mohammad Abu Hammour stated that the forecast
growth in GDP for this year has been adjusted to 4%
from the previous 5% growth projection.
According to the International Monetary Fund (IMF)
government debt was forecast to reach 67,1% of GDP by
the end of 2010, while the fiscal deficit came down
during the course of the year, falling by around 35% to
$808,91 million, compared with $1,23 billion during the
same period in 2009. The inflation rate was 6,1% in
December 2010, rising by 1,5% from the previous
EXPORT & IMPORT SA // APRIL 2011
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month. Standard & Poor’s rating agency cut its long-term
local-currency rating to BB+ or junk.
Thanks to multiple bilateral agreements, Jordan has
become one of the most open economies. Setting up
business in Jordan offers prospects not only for
expansion on the local market, but also to neighbouring
countries because of the re-exporting platforms.
Jordanian authorities are also encouraging investments
by promoting special conditions for foreign investors at
the 13 special economic zones (QIZ).
Lebanese Prime Minister Saad Hariri announced in late
December the formation of the Mashreq (Levant)
Business Forum, which includes Lebanon, Turkey, Syria
and Jordan. The forum’s goal is to promote free trade in
the region. Fourteen sectors were identified as being a
priority including industry, agriculture, science, finance,
tourism and oil. The forum will represent the private
sector in the four countries, which have agreed to
tighten economic ties between representatives of their
private sectors. The volume of trade between the four
countries amounts to $12 trillion.
Jordan is currently exploring nuclear power generation to
forestall energy shortfalls. Jordan relies almost entirely
on imported energy and is turning to nuclear power to
meet increasing electricity demand. It plans to build
reactors by 2019 but it will first need to choose a
supplier of its first nuclear plant within 1H11. It has
signed nuclear-cooperation agreements with 11
countries, most recently with Italy in February this year.
Jordan’s Ministry of Planning and International
Cooperation (MOP) has released its Executive
Development Programme (EDP) for 2011-13 with
$8,4 billion to be distributed among 24 different
economic sectors. Around 55% of the spending will be
allocated to infrastructure, water, housing and
transportation projects; 20% to social welfare; 14% to
education; 6% to improving business practices; 3% to
modern technical training; 2% to financial and
administration reforms; and 1% to legislation. Some of
the EDP’s planned projects will rely on public-private
partnerships for funding, particularly for large projects
such as the National Railway Network.
According to the finance minister, strong demand for
Jordan’s upcoming debut Eurobond issue will help a
rebound in FDI, underpinned by the country’s macroeconomic
fundamentals and political stability. The
minister did not disclose the size of the issue but
investment bankers have estimated Jordan is seeking
not less than $500 million depending on the level of
demand and the right pricing. In early March Moody’s
said it assigned a BA2 rating to the proposed senior
unsecured bond while Standard & Poor’s Ratings
Service said it assigned it a BB long-term debt rating.
Latest trade developments
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Credit Guarantee country profile
Major exports: clothing, fertilizers, potash, phosphates,
vegetables and pharmaceuticals.
Major imports: crude oil, machinery, transport
equipment, iron and cereals.
Main trading partners: Saudi Arabia, China, US,
Germany, Iraq, India, Syria and UAE.
SA exports to Jordan totalled R153 million in 2008,
R244 million in 2009 and R186 million in 2010.
SA imports from Jordan totalled R237 million in 2008,
R98 million in 2009 and R104 million in 2010. ◆
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