Jordan : Despite regional flashes of terror, Jordanian economy shines bright

The second quarter of 2015 proved to be a further step forward for the Hashemite Kingdom’s economy, as most economic sectors improved. However, the tourism sector and the local bourse suffered the brunt of the force of local and regional difficulties. Regarding the influx of Syrian refugees, data from the United Nations’ High Commissioner for Refugees (UNHCR) reports that, as of June 17, the number of Syrian refugees in the country has roughly remained stable over the past three months, with the total number standing at 629,128. Unfortunately, the funding necessary to provide the required care for refugees in Jordan is still well below expectations, with only $267.80M of the estimated required budget of $1,191.32M so far received.

Jordan : Despite regional flashes of terror, Jordanian economy shines bright                       Jordan : Despite regional flashes of terror, Jordanian economy shines bright

The most note-worthy development in the Kingdom’s economy was the conclusion of the seventh and final review of the International Monetary Fund (IMF). Jordan’s overall economic performance throughout the year satisfied pre-arranged standards of performance and granted Jordan access to the remaining $400M of the $2B stand-by arrangement.

On the economic front, the International Monetary Fund (IMF) anticipated growth rate to reach 3.5% in 2014, up from 2.9% in 2013, while the inflation rate for 2014 stood at 3.0%, with the largest increases in the CPI observed in the clothing and footwear index, followed by real estate and housing.

Tourism in Jordan continued to experience poor results in 2015. According to the Ernst & Young hotel occupancy report, the capital Amman has experienced a 10-percentage point year-on-year (y-o-y) decrease in hotel occupancy rates by May 2015 to 55%. Over the same period, average room rates and room yields in Amman experienced respective declines of 5.6% and 20.2% to $155 and $86. These drops in performance can be mainly attributed to the regional terrorism threat that has escalated since the start of the year. Similarly, travel receipts dwindled by 14.8% y-o-y to $1.24B by April 2015.

In contrast, Jordan’s performance in trade revealed notable improvements, as the deficit narrowed by 15.66% y-o-y by end-April 2015 to $4,082.18M. This improvement can be directly traced to the 14.34% decline in total imports to $6,557.02M.  This decrease can be linked to significant drops in the value of imported petroleum crude, gas and diesel oil, and fuel oil by 29.15%, 57.14% and 55.79% to respective values of $539.34M, $356.73M and $62.84M due to lower international oil prices and supply cuts from Egypt, which were partially offset by increases in imports from Russia, India and the UAE. It is also worth mentioning that iron and steel witnessed an annual 22.66% slow-down in imports to $197.94M by May 2015, while nuclear reactors, machinery and mechanical appliances witnessed an 18.44% increase to $646.11M over the same period. On the exports side, the 12.08% annual decline during the first five months of 2015 to $2,474.84M is largely linked to the respective declines of pharmaceutical products, mineral/chemical fertilizers and potassium crude by 19.68%, 45% and 14.62% y-o-y to respective amounts of $168.72M, $99.83M and $190.29M.

Regarding the fiscal balance, the Hashemite Kingdom succeeded in recording a fiscal surplus (including foreign grants) equivalent to $113.47M by end-March 2015, compared to a fiscal deficit of $420.34M over the same period in 2014. Disregarding foreign grants of $294.62M, Jordan’s fiscal deficit for the first quarter of 2015 tallied $181.15M, while this figure stood at $712.08M by end-March 2014. Net outstanding public debt by March 2015 edged up by 1.42% y-o-y to equal $30,018.38M, and stood at 76.8% of GDP, compared to 80.8% during the same period last year. In details, net outstanding public debt increased 2.86% y-o-y to $18,551.52M (47.5% of GDP), while outstanding external public debt inched down by 0.83% y-o-y to $11,466.86M (29.3% of GDP) by March 2015. In terms of public revenues, Jordan witnessed a 14.87% annual increase to $2,403.07M, as tax revenues rose 7.94% to $1,456.85M, equivalent to 69.10% of domestic revenues.


Developments in the Kingdom’s banking sector were summarized by a 3.93% year-to-date (y-t-d) uptick in money supply M2 to $43,761.17M by March 2015, following the increase of both domestic deposits and currency in circulation by 4.39% and 0.85% to $38,236.46M and $5,524.71M, respectively.  Credit facilities provided by Jordanian banks rose by $896.11M since the start of the year to attain $28,651.39M by end-Q1 2015. Net domestic assets at the country’s licensed banks gained 4.23% y-t-d to $40,618.66M, while net foreign assets at the same banks experienced a slight 1.10% slip to $2,922.19M during the same period. Meanwhile, foreign currency reserves at the Central Bank of Jordan experienced a $421M decrease by end-March to stand at $13,657.80M, thereby covering roughly 7.2 months of Jordan’s imports.

In addition, the Central Bank of Jordan reduced each of the re-discount rate and the overnight, weekly and monthly repurchase agreements rates by 25 basis points (bps) to 4%, 3.75%, 2.75% and 2.75%, respectively. The overnight deposit window rate experienced a more pronounced decrease of 100 bps to 1.75%.

A surge in prices of listed securities following the unveiling of the “Jordan 2025” development blueprint between the 12th and the 16th of April was not enough to maintain positive investor sentiment on the Amman Stock Exchange. The Jordanian Bourse witnessed the resultant gains erased by the end of the quarter, closing on June 30th at 2,116 points. This value is equivalent to a 2.26% y-t-d decline. During the first half of 2015, 1.29B shares were traded on the exchange for a combined value of $1.88B, compared to 1.32B shares worth $1.90B over the same period in 2014. Meanwhile, the total number of transactions witnessed a 15.44% y-o-y decline by June 2015, totaling 447,170 transactions. By end-June 2015, the Index’s market capitalization stood at $25.48B, compared to $27B at June 30th, 2014.

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