世界发展银行-Jordan-Economic-Monitor,-Spring-2021---Uncertain-and-Long-Trail-Ahead_72页_2mb

Jordan Economic Monitor Summary

Core Content

This report provides an analysis of Jordan's economic situation during the early stages of the COVID-19 pandemic, highlighting the impact on the real sector, labor market, fiscal and debt developments, balance of payments, and monetary policy. It also includes special focus sections on the private sector and inequality in Jordan.

Main Points

Economic Impact of the Pandemic

• Jordan's economy contracted by 1.6% in 2020, marking the first contraction in three decades.
• The contraction was less severe than in many other countries, attributed to timely fiscal and monetary interventions, and a favorable terms of trade due to the global oil price decline.
• The tourism sector, which accounts for 60% of output and two-thirds of employment, was significantly affected by the pandemic.

Fiscal and Debt Developments

• Jordan implemented a range of fiscal measures to support the economy during the pandemic, including tax exemptions and direct financial support.
• The Central Government's fiscal deficit widened to 7.4% of GDP, an increase of 2.8 percentage points from 2019.
• The General Government debt-to-GDP ratio increased by nearly 7 percentage points, reaching 85% at the end of 2020.

Monetary Policy and Inflation

• The Central Bank of Jordan (CBJ) provided a total intervention package of around 8% of GDP.
• The CBJ's monetary policy helped stabilize inflation, which remained relatively low despite the economic shock.
• The inflation rate in Jordan was influenced by changes in oil prices and the government's fiscal response.

Balance of Payments

• Jordan's current account deficit (CAD) widened to $3.5 billion or 8.0% of GDP in 2020, compared to $0.95 billion or 2.1% in 2019.
• The decline in international oil prices contributed to a windfall gain for Jordan, improving its trade balance.
• Despite the CAD widening, external financing remained comfortable due to better market access and donor inflows.

Labor Market

• The labor market deteriorated sharply in 2020, with unemployment reaching 24.7% in Q4-2020, up from 19.0% in the same period in 2019.
• Youth unemployment was particularly high, with every second youth unemployed and three out of every four female youth unemployed.
• The informal sector remained a significant portion of the labor force, with limited job creation from economic growth.

Structural Issues

• Jordan's economy has long faced structural challenges, including low labor force participation, high informality, and weak productivity.
• These issues were exacerbated by the pandemic, which disrupted economic activity and led to a decline in employment and output.

Key Information

Economic Recovery Outlook

• Jordan's real GDP is projected to grow by 1.4% in 2021, indicating a muted recovery due to limited base effects and ongoing vaccine rollout challenges.
• The recovery is contingent on the pace and scale of domestic and international vaccination efforts, as well as the effectiveness of policy measures to support growth and employment.

Policy Response

• The government, CBJ, and Social Security Corporation implemented timely and rapid measures to mitigate the socioeconomic impact of the pandemic.
• These included:
  • Sales tax exemptions on medical equipment.
  • Direct support for the tourism sector (JD 20 million).
  • Reductions in social security contributions for businesses.
  • Unemployment allowances for workers in non-operational businesses.
  • Expansion of cash transfer programs to support vulnerable households.

Special Focus Sections

1. Private Sector Snapshot

   • Lockdowns and demand shocks led to high closure rates, especially in the services sector.
   • Jordanian firms introduced new products and increased use of digital technologies, though the pace of transformation lagged behind other countries.
   • The priority moving forward is to support firms, particularly smaller ones, in building resilience and improving firm capabilities.

2. Inequality and the Pandemic

   • The pandemic increased extreme poverty and income inequality in Jordan.
   • Inequality has significant implications for post-pandemic recovery and social policy.
   • The report emphasizes the need for equitable and inclusive policies to support the poorest and most vulnerable populations.

Conclusion

Jordan's economy faced a significant contraction in 2020 due to the pandemic, but the impact was less severe than expected, thanks to timely policy interventions and favorable global conditions. However, the country's structural weaknesses and limited vaccine rollout have hindered a strong recovery. Moving forward, Jordan needs to focus on growth-enhancing reforms, improving productivity, and ensuring inclusive and equitable recovery strategies to build resilience and support sustainable growth.