Country Report Jordan

Outlook for 2008-09

• The king, Abdullah II, is likely to remain in power, supported by the loyal and effective armed forces.
• The opposition Islamic Action Front (IAF) is set to become more confrontational, with hawks within the party increasingly in the ascendancy. However, its influence will be weakened by continued in-fighting.
• The king will continue to pursue an active diplomatic approach to resolving the region's unstable political scene, but his influence will remain limited, and his pro-Western orientation is unpopular with the population at large.
• The government will continue to pursue economic liberalisation, but, mindful of any potential public backlash, progress will be relatively slow.
• The fiscal deficit will widen in 2008-09, and the government will remain heavily dependent on foreign official grants.
• We have revised our inflation forecast upwards, after raising our projections for global prices for both oil and food. We now expect average consumer price inflation to reach 13.6% in 2008, before falling to 5% in 2009.
• Jordan's current-account outlook has worsened, after we raised our import spending projections in line with our higher oil price forecast. We now forecast that the current account will return a deficit of 23% of GDP in 2008-09.

Monthly review

• Jordan has marked the 60th anniversary of Israel's creation with opposition protests and arguments over the public assembly law.
• King Abdullah has presented a largely upbeat picture of the country's economic situation in a speech to mark Independence Day. However, with fuel prices rising once again in May, the IAF has warned of unrest.
• The agreement between Lebanon's various opposing factions in Doha, Qatar in May could help accelerate Jordan's efforts to strengthen ties with Syria. However, differences over Hizbullah are likely to persist.
• The IMF has praised Jordan's recent economic performance, but has called for greater budgetary restraint.
• Import spending surged by 38% year on year in the first quarter of 2008, led by a 126% increase in the oil import bill, raising concerns over the potential scale of the trade deficit this year.
• The government has pushed ahead with plans to expand wind and solar power-generation capacity and has signed an agreement with France, which will assist Jordan in the building of nuclear reactors.