Country Report Jordan June 2009

Outlook for 2009-10

• Power in Jordan remains firmly in the hands of the king, Abdullah II, who is expected to retain the loyal support of the army and the security services.
• The cabinet will prioritise economic reform and stability over political liberalisation. However, in the near term the government will focus its efforts on supporting demand in the face of a rapidly weakening economy.
• The government is forecast to return wide fiscal deficits, as tax receipts are depressed by slower economic growth and the fiscal stance remains expansionary. As a result, Jordan will remain heavily reliant on foreign grants.
• Inflation will decline sharply over the forecast period, owing largely to lower global commodity prices. It is projected to fall from 14.9% in 2008 to an average of 4.5% in 2009-10.
• Real GDP growth will slow, as tourism and financial services are hit by the global recession and the property boom comes to an end. As a result, we expect growth to fall from 5.6% in 2008 to an average of just 2.7% in 2009-10.
• Jordan's current-account deficit will narrow sharply, in line with lower global commodity prices (although oil prices have crept higher recently), from an estimated US$2.4bn (12.1% of GDP) in 2008 to around US$1.3bn in 2009-10.

Monthly review

• The decision of 53 MPs in the Israeli Knesset (parliament) to back a proposal to designate Jordan as the Palestinians' homeland has caused uproar in Jordan, although in reality the scheme is highly unlikely to become law.
• King Abdullah has warned, somewhat imprecisely, of a war in the Middle East if efforts to restart peace negotiations are not stepped up, and has promoted a new "57-state" solution to the region's problems.
• The opposition Islamic Action Front has appointed an interim leader after the previous secretary-general, Zaki Bani Irsheid, stepped down as part of an effort to reconcile hardliners and moderates within the party.
• The fiscal deficit widened markedly in the first four months of 2009, as revenue growth fell (owing to a slowdown of the economy) and capital spending surged.
• Plans to introduce 3G telecoms services to Jordan have received a setback after the only bidder, Jordan Telecom Group, had its bid rejected by the regulator, on the grounds that it was asking for too many concessions.
• The government has signed a potentially far-reaching deal with the Jordan Oil Shale Company, a subsidiary of Royal Dutch Shell, to explore and develop oil shale resources in the country.

This report covers the following industry codes:
SIC Code: 60;37
NAICS Code: 52;336