Country Report Jordan May 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 to lower global commodity prices and a stronger US dollar. As a result, inflation is projected to fall from 14.9% in 2008 to an average of 4.6% in 2009-10.
• Real GDP growth will fall, 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.
• We have revised down our forecast for Jordan's current-account deficit, after official data revealed a lower than estimated shortfall in 2008. We now expect the current-account deficit to narrow to around US$1bn in 2009-10.

Monthly review

• King Abdullah has visited Washington for a meeting with the US president, Barack Obama. The trip appeared to be a success, with Mr Obama giving his backing for the two-state solution for Israel and the Palestinian Territories.
• The new political development minister, Musa Maaytah, has called for a "gradual and risk-free" approach to political reform, disappointing those that believed the former left-wing political activist would accelerate change.
• The finance minister, Bassem al-Salem, has announced a raft of potentially far-reaching tax proposals, which would include a flat tax of 12% for corporations, although financial and mining firms would pay a higher rate of 25%.
• The Central Bank of Jordan has reduced interest rates and lowered banks' reserve requirements once again, as inflation and the fallout from the global recession have begun to affect domestic economic conditions.
• The government has said it will rework its Decent Housing for Decent Living programme. In 2008 some 200,000 people applied for the initiative, but, owing to bank reluctance to lend, just 412 people qualified.
• Preliminary data from the Central Bank of Jordan have revealed that the current-account deficit narrowed slightly in 2008, as exports returned a strong performance over the year, and imports fell sharply in the final quarter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;47;70
NAICS Code: 52;48;72