JORDAN ECONOMIC MONITOR Global Turbulence Dampens Recovery and Job Creation Spring 2022 Jordan Economic Monitor Global Turbulence Dampens Recovery and Job Creation Spring 2022 Middle East and North Africa Region © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202–473–1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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TABLE OF CONTENTS Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Acronyms and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix ‫ امللخص التنفيذي‬. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv 1.  Economic Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Real and Labor Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Fiscal and Debt Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Balance of Payments Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Monetary Policy and Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.  Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 3.  Special Focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Creating More and Better Jobs in Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Annex 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 The Government of Jordan’s Economic Priorities Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Annex 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Selected Recent World Bank Publications on Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Annex 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Summary of Special Focuses from the Latest Jordan Economic Monitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 iii List of Figures Figure 1 Recovery Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 2 Growth Contribution from the Supply Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 3 Growth of Subsectors Vis-à-Vis 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Figure 4 Unemployment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Figure 5 Overall Central Government Fiscal Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 6 Breakdown of Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 7 External Public Debt by Lender in 2017–2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 8 Public Debt Service (Budget and Guaranteed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 9 Jordan’s Current Account Developments and their Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 10 Jordan’s Key Balance of Payment Flows and CBJ’s Foreign Reserves Adequacy in 2021 . . . . 10 Figure 11 Trends in Inflation, Money Supply and Banks’ Credit in Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 12 Joblessness Has Been Persistently Low Since 2000, Particularly among Women . . . . . . . . . . . . 22 Figure 13 Low Net Job Creation, Well Below Flow of New Entrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Figure 14 Sectors Creating Most of the Jobs Tend to Be Less Productive and the Productivity of these Sectors Has Declined or Remained Stagnant . . . . . . . . . . . . . . . . . . . . . . . . .23 Figure 15 New Business Density . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Figure 16 Distribution of Jordanian Regular Employees in Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 List of Tables Table 1 Jordan – Selected Economic Indicators (2018–2023) List of Boxes Box 1 Jordan’s Economy in Six Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Box 2 COVID-19 Pandemic Impact on Jordanian Firms: Evidence from the 4th Follow up Enterprise Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Box 3 Recent Terms-of-Trade Shock and Jordan’s Merchandize Trade Balance – A Counterfactual Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Box 4 CBJ’s Monetary Policy Stance During the Pandemic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 iv JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION PREFACE T he Jordan Economic Monitor provides an Chartouni (Economist), John Gabriel Goddard (Lead update on key economic developments Economist), Paul Moreno-Lopez (Senior Economist), and policies over the past six months. It also and Naoko C. Kojo (Senior Economist). The Jordan presents findings from recent World Bank analytic Economic Monitor has been completed under the work on Jordan. The Monitor places them in a longer- guidance of Eric Le Borgne (Practice Manager), term and global context and assesses the implications Holly W. Benner (Resident Representative), and Saroj of these developments and other changes in policy Jha (Regional Director). Nabeel Darweesh (External on the outlook for Jordan. Its coverage ranges from Affairs Officer) is the lead on communications, out- the macro-economy to financial markets to indicators reach, and publishing. of human welfare and development. It is intended for The findings, interpretations, and conclusions a wide audience, including policy makers, business expressed in this Monitor are those of the World Bank leaders, financial market participants, and the staff and do not necessarily reflect the views of the community of analysts and professionals engaged in Executive Board of The World Bank or the govern- Jordan. ments they represent. The Jordan Economic Monitor is a product of For information about the World Bank and the Middle East and North Africa (MENA) unit in the its activities in Jordan, including e-copies of this Macroeconomics, Trade and Investment (MTI) Global publication, please visit www.worldbank.org/en/ Practice in the World Bank Group. The overall effort country/jordan. To be included on an email distri- has been led by Saadia Refaqat (Senior Economist, bution list for this Jordan Economic Monitor series MTI) and Anastasia Janzer (Consultant, MTI). The and related publications, please contact Nabeel report has been prepared by a core team com- Darweesh (ndarweesh@worldbankgroup.org). For posed of Saadia Refaqat (Senior Economist, MTI), questions and comments on the content of this pub- Anastasia Janzer (Consultant, MTI), Asif Mahmood lication, please contact Saadia Refaqat (srefaqat@ (Consultant, MTI), and Jumi Kim (Consultant, MTI). worldbank.org) or Anastasia Janzer (ajanzeraraji@ The Special Focus: Creating more and better jobs in worldbank.org). Questions from the media can be Jordan, has been led by Cristobal Ridao-Cano (Lead addressed to Nabeel Darweesh (ndarweesh@world- Economist), and Carole Chartouni (Economist). The bankgroup.org). report also benefitted from comments from Jonna The data cut-off for this Jordan Economic Maria Lundvall (Senior Social Scientist), Carole Monitor is April 15, 2022. v ACRONYMS AND ABBREVIATIONS 3-mma 3-month moving average LMIS Labor Market Information System 12-mma 12-month moving average MENA Middle East and North Africa BoP Balance of Payments MENAP Middle East, North Africa, BPO Business process outsourcing Afghanistan, and Pakistan Bps Basis points MOE Ministry of Education CAD Current Account deficit MOF Ministry of Finance CBJ Central Bank of Jordan MOL Ministry of Labor CEO Chief Executive Officer NDA Net domestic assets CG Central Government NEP National Employment Program CPI Consumer Price Index NEPCO National Electricity Power Company CPSD Country Private Sector Diagnostic NFA Net foreign assets COVID-19 Coronavirus Disease 2019 NIR Net international assets DoS Department of Statistics No. Number EFF Extended Fund Facility OECD Organization for Economic Co- EME Emerging Market Economy operation and Development ES Enterprise Survey PMR Product Market Regulations FDI Foreign direct investment PCR Polymerase Chain Reaction FLFP Female labor force participation PPP Public-Private Partnerships FOB Free on Board Q1 First Quarter FX Foreign Exchange Q3 Third Quarter GCC Gulf Cooperation Council Q4 Fourth Quarter GDP Gross Domestic Product ToT Terms of Trade GFS Government Finance Statistics TVSD Technical Vocational Skills GNFS Goods and nonfactor services Development Council HTU Al Hussein Technical University VTCs Vocational Training Centers IMF International Monetary Fund SDR Special drawing rights ITO Information technology outsourcing SMEs Small and medium-sized enterprises JEM Jordan Economic Monitor SSC Social Security Corporation JD Jordanian Dinar SOE State owned enterprise vii SSIF Social Security Investment Fund WBG World Bank Group U.S. United States WBL Women, Business and the Law US$ United States Dollar WDI World Development Indicators WAJ Water Authority of Jordan WEO World Economic Outlook WB World Bank viii JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION EXECUTIVE SUMMARY W hile uncertainty around the COVID-19 in China is likely to pose an additional challenge to pandemic lingers on, the global global recovery. economy is set to face a new round of Jordan’s economic recovery from the headwinds. Recent estimates from the IMF1 suggest pandemic remains moderate, albeit broad-based. that the global economy registered a strong rebound Against a contraction of 1.6 percent in 2020, the last year from the unprecedented contraction economy registered strong growth of 2.2 percent last induced by the pandemic. Improved vaccine rollouts, year, which is slightly above the average of 2.1 percent along with positive spillovers from accommodative registered over the five years prior to the pandemic. monetary and fiscal policies, enabled an immediate This recovery has been largely supported by lagged and strong recovery. However, this nascent recovery effects of an accommodative but prudent monetary remains uneven with a significant divergence in and fiscal policy mix along with recovery in domestic pace observed between advanced economies and demand as a result of a gradual reopening of the emerging markets.2 economy amid an increased pace of vaccine rollouts. In addition, the recovery has been also Reflecting these positive developments, the sub- accompanied by global inflationary pressures. sectors of both industry and services experienced a These pressures were further reinforced by higher broad-based expansion. In particular, the recovery in global commodity prices and rising transportation the travel and tourism sectors was quite encouraging costs. To control rising inflation, many central banks - despite significant challenges due to intermittent including the major ones, have started to tighten their lockdowns. In 2021, tourist receipts increased by monetary policy stance. 96 percent, reaching around half of the 2019 level. Amid these developments and their sub- sequent impact on the global economy, another 1 IMF World Economic Outlook (WEO), April 2022. setback came with the Russian invasion of 2 According to the IMF, in advanced economies the shortfall Ukraine. The war has caused major supply disrup- relative to the pre-pandemic trend will narrow through tions, leading to historically higher prices for a number the forecast horizon. However, in emerging market and developing economies, economic activity is expected of commodities. This has added another layer of to remain below the pre-pandemic trend throughout the headwinds to nascent global growth prospects as well forecast horizon due to relatively larger human capital as inflationary pressures. In this context, emerging and investment losses and more limited policy support, supply chain bottlenecks due to zero-COVID policy and slower vaccination. (IMF WEO April 2022). ix Furthermore, the pick-up in economic activity also reducing state-induced distortions. This needs to be contributed to higher tax revenues, helping with the accompanied by efforts to upskill the workforce, labor overall fiscal consolidation effort. policies that facilitates job creation while protecting Yet, spare capacity in the economy led to workers, as well as specific measures to create weak recovery in jobs, especially among youth. The opportunities and lift constraints to female employ- country’s total unemployment rate stood at around 23 ment. While social norms are a big driving factor for percent at end-2021, compared to pre-pandemic level low female labor participation rates, the global experi- of 19 percent at end-2019. Nevertheless, recovery in ence shows that norms change as more women join the service sector helped alleviate some of the pressure the labor force. Thus, more opportunities for females from the labor market, when unemployment peaked can be created by lifting specific constraints to female at 25 percent in Q1–2022. However, unemployment employment, such as the removal of legal restrictions levels remain significantly higher in Jordan compared around getting a job, expanding access to quality to its regional peers. Indeed, the pandemic has left childcare, and increasing women’s financial inclusion. deep scars on jobs for the young population, which Jordan’s private sector is showing sign makes up around one fifth of Jordan’s total working age of stunting. Evidence from the World Bank’s fourth population. As of end 2021, official statistics indicated COVID-19 follow up survey (see Box 2) finds that, for that more than half of the country’s young population is the first time since the beginning of the pandemic, the unemployed. This impact was even more pronounced share of firms that were “confirmed closed” is showing among young female workers. Hence, a striking gender a slight decline. However, while small firms are showing divide continues to characterize the Jordanian labor timid signs of upturn, declines in monthly sales for market with female labor participation rate almost 40 large firms have become even more pronounced. percentage points lower than male participation rates, Moreover, despite the underlying economic rebound, ranking among the lowest in the world. Several factors all firms reported an accelerated decline in their full- contribute to this: workplace conditions that are not time workforce, which was more pronounced for small family-friendly; limited financial inclusion needed to firms and firms operating in the services sector. This boost entrepreneurship; social norms, and a range likely reflects the nature of the COVID-19 shock which of legal restrictions affecting women’s access to eco- has negatively affected contact-intensive sectors, such nomic opportunities, as evidenced in the 2022 Women, as services, more intensely. This protracted recovery Business and the Law Index that places Jordan among may also explain persistent labor market challenges the bottom ten percent performers. There are also spe- which is making unemployment rates sticky. cific constraints that affect women disproportionately, Overall, long-term trends in private sector such as the lack of affordable, quality childcare and performance and Jordan’s business environment reliable, safe public transportation. suggests that the pandemic has exacerbated the The reports Special Focus “Creating more Jordanian private sector’s regional and global and better jobs in Jordan” focuses on key struc- gap in growth and performance. Firm-level met- tural challenges in the Jordanian labor market as rics captured by the 2013 and the 2019 Enterprise well needed reforms to overcome them. Jordan’s Survey reveals that the competitiveness of Jordan’s labor market is characterized by high levels of unem- private sector has been declining even prior to the ployment and informality. These rifts are largely the onset of the COVID-19 shock. For instance, Jordan’s result of the limited capacity of the private sector to private sector seemed to not fully utilize the existing generate more and better jobs. Higher job creation is production capacity, with average capacity utilization generally held back by a productive structure that is reported 8 percentage points lower than the MENA dominated by small, low-productivity firms—the result average and 13 points lower than upper middle- of inefficient firm dynamics. Thus, creating more income countries. According to The Jordan Country and better jobs in Jordan requires first and foremost Private Sector Diagnostic 20213 key constraints lim- reforms that will increase market contestability by iting the private sector’s ability to generate jobs and x JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION to compete in international markets are high business from both direct and indirect taxes outperformed the costs, policy unpredictability and investment risks, budgeted targets envisaged for 2021. In addition to an excessive labor market segmentation, and shortcom- expansion in economic output, better compliance and ings related to market competition. administration have also contributed towards stronger Despite unfavorable changes in global revenue collection last year. On the spending side, the commodity prices, a pass-through to domestic GOJ showed strong commitment to meet the IMF-EFF prices remained subdued. Notwithstanding broad- program targets. Both current and capital spending based recovery, the output in major subsectors has remained on the lower side than the budgeted targets still not reached the pre-pandemic levels during 2021. of 2021. Nevertheless, capital spending still reached Reflecting this slack in the economy, the core infla- 3.5 percent of GDP, its highest level last four years. tion stayed at lower levels despite an overall increase This is a welcome development given the critical role in the headline inflation from 0.3 percent in 2020 to of public investment in reviving economic activity and 1.4 percent in 2021. In addition to weak domestic employment. Overall, Central Government fiscal deficit8 demand, slower pass-through to domestic prices (including grants) indicated marked improvement along with some price controls have helped alleviate in 2021, reaching 5.7 percent of GDP, which is 1.6 the underlying increase in Jordan’s inflation trajectory and 0.4 percentage points lower than the 2020 and during 2021.4 Nevertheless, in addition to being dis- 2021 budget targets, respectively. Importantly, similar tortive of market signals, existing price controls may developments were reflected in case of primary fiscal not be a sustainable way to deal with inflation. balance of the Central Government (CG). Nevertheless, CBJ kept its monetary policy stance broadly heightened pressure from broader public sector contin- accommodative to support the nascent recovery gent liabilities remains a source of a concern. To some amid high unemployment. CBJ kept its key interest extent, solid economic turnaround and consolidation rates unchanged during 2021. Rates were last reduced effort helped slow down the accumulation of debt-to- in March 2020.5 With the aim of safeguarding the JD GDP ratio relative to rise that occurred during 2020. peg to the US dollar, and to sustain the strength and As a result, Government and guaranteed gross debt9 attractiveness of the JD-denominated assets against reached 113.8 percent of GDP in 2021 compared to assets denominated in other currencies, and to help anchor gradually increasing inflationary pressures, the CBJ raised its key interest rates by 25 basis points in 3 World Bank Group. Country private Sector Diagnostic. March 2022 and 50 basis points in May 2022, which Creating Markets in Jordan. Washington DC (World Bank, 2021). moved the main CBJ policy rate to 3.25 percent. 4 IMF country report No. 22/4. Overall, credit to the economy grew by around 5 per- 5 The CBJ main rate was reduced by 150 bps to reach 2.5 cent in 2021, on top of a 5.7 percent increase posted in percent in March 2020. 2020. The deceleration in credit growth as economic 6 Jordan entered into a four-year IMF-EFF program in recovery takes hold is partly reflecting a gradual but March 2020 for an amount of about US$1.3 billion, calibrated unwinding of COVID-related supportive which was augmented by US$200 million in June 2021. Jordan and IMF reached staff level agreement on the measures introduced by the CBJ. Furthermore, fourth review on 24 May 2022. prudent monetary management during the pandemic 7 Reflecting these developments, in December 2021, and the recovery phase also helped close the fourth Fitch rating agency affirmed Jordan’s Issuer default review of the IMF-EFF program.6 This together with an rating at ‘BB-’ and revised its outlook to Stable from effective anchoring through dinar peg boosted much Negative. Moreover, in March 2022, Standard and needed market confidence.7 Poor’s (S&P) affirmed Jordan’s B+/B sovereign credit rating, maintaining a stable outlook. CBJ’s accommodative monetary policy 8 As per IMF GFS classification. stance was broadly supported by prudent fiscal 9 Definition of debt in this report follows the IMF GFS and management. This in turn was led by strong growth therefore includes the securitization of domestic arrears in tax and non-tax revenues. Indeed, the collection based on the IMF country report No. 22/4. Executive Summary xi 109.0 percent of GDP in 2020, while debt net of Social developments. This includes the impact of the war in Security Fund debt holdings stood at 92 percent of Ukraine on global food and energy prices. Together, GDP compared to 88.0 percent of GDP in 2020. these developments may result in keeping the coun- In spite of fiscal prudence, unfavorable terms try’s external sector elevated for another year along of trade led to a widening of the current account with a slowdown of the domestic economy. Meeting deficit. This happened despite a substantial growth growing external financing needs can become more in exports in 2021. In fact, the merchandize trade challenging if both the magnitude and speed of the deficit reported an historical increase during 2021. US Federal Reserve’s interest rate hike accelerates Specifically, growth in non-energy imports remained to curb rising domestic inflation. In order to counter buoyant as manufacturing activities showed strong these potential pressures, authorities need to calibrate recovery from pandemic lows. Estimates indicated a prudent macro policy mix. This is important in the that around one-fourth of deterioration in merchandize context of addressing underlying monetary and finan- trade deficit in 2021 can be explained by the surge cial stability risks that may remain unobserved due to in global commodity prices. Furthermore, the recovery recent targeted and supportive fiscal measures.11 in travel receipts in 2021 exceeded expectations, Over the medium-term, growth is projected but levels remained far below pre-pandemic levels. to reach 2.3 percent. Unless structural reforms to Nonetheless, even this improvement was partially promote private sector-led growth and investment offset by a sharp increase in global transportation are accelerated, medium-term growth prospects are cost due to disruptive activities at major global ports.10 likely to remain constrained by long standing struc- Workers’ remittances, on the other hand, indicated a tural impediments along with external headwinds. marginal recovery as COVID concerns on part of both Moreover, uncertainty around global developments Delta and Omicron variants led to gradual reopenings poses medium-term risks to Jordan’s outlook. Negative in source countries. On balance, the current account ripple effects being created globally as a result of the deficit (including grants) reached 8.8 percent of GDP Russian invasion of Ukraine are significant headwinds in 2021 compared to 5.7 percent of GDP in 2020. for a small oil importer country like Jordan. Persistent Nevertheless, Jordan ended 2021 on a supply bottlenecks leading to additional disruptions to strong footing. This is reflected through substantial international trade, accelerated inflationary pressures, improvement in the CBJ’s gross official foreign and climate-related additional restrictions represent reserves, which reached US$19 billion at end-2021; additional potential downside risks. up by around US$2.1 billion from end-2020 posi- A more assertive investment-enabling tion. Supported by strong multilateral and bilateral reform agenda would help Jordan better manage commitments, the significant improvement in the turbulence and uncertainty. First, Jordan needs to CBJ’s foreign reserves helped authorities to meet face the microeconomic reform agenda to dynamize the IMF program’s net international reserves targets the creation, operation, and, when needed, the exit by a comfortable margin—an important indicator of private firms across the board, with more assertive that reflects external stability. Moreover, standard and sustained efforts to solidify a level playing field. reserves adequacy measures also suggest that the Second, these reforms will enable Jordan to tackle CBJ gross official foreign reserves position remained the dire unemployment and labor market situation of at a comfortable level even in comparison to most the country, especially for women and young people. regional and peer countries in recent periods. Going forward, the Jordanian economy is expected to sustain recent momentum, but signifi- 10 Global container cost stood at U$9,437 at end of 2021 compared to U$3,143 a year ago [Source: Bloomberg]. cant global headwinds are likely to lead to some 11 The CBJ extended the deferment on debt repayments dampening. Like other import-dependent emerging by affected borrowers to banks to from June to end- economies, Jordan’s near-term economic outlook 2021. Hence, any potential asset quality effects of the is facing significant challenges due to recent global pandemic are likely to manifest after this period only. xii JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION These efforts, together with a more dynamic private investment that is also more efficient and effective sector, can increase efficiency of use of resources in should go in tandem with fewer price controls, to the productive sectors, leading to increased output ensure that signals on investment and prices in the and growth. Third, Jordan will have to transit to a post- economy are adequate. And fourth, Jordan will have crisis macroeconomic policy framework, especially to to focus on revamping its debt financing strategy to align fiscal performance and inflation to the new set sustain public investments in infrastructure and in the of circumstances it faces. For instance, more public development of its human capital. BOX 1. JORDAN’S ECONOMY IN SIX FIGURES Jordan’s Recovery from the COVID Pandemic Travel Recovery for Many Tourist Countries Remains Modest Compared to Regional and in the Region Remains Low Relative to the Peer Economies, Partially Owing to its Muted pre-Pandemic Levels. Contraction in 2020. Travel receipts Real GDP growth average US$ inflows in 2019=100, 4-qma y-o-y % change 120 12.0 100 8.0 80 5.1 4.0 4.9 0.0 60 14.9 –4.0 40 8.2 –8.0 5.9 20 –12.0 0 Qatar Thailand Jordan Bahrain Saudi Arabia Egypt Tunisia Indonesia Armenia Philippines Pakistan Morocco India Turkey 2019 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Morocco Egypt Jordan 2021 2020 Pre-Pandemic (2015–19) Tunisia Turkey (continued on next page) Executive Summary xiii BOX 1. JORDAN’S ECONOMY IN SIX FIGURES (continued) Jordan Continues to Face an Exceptional Rising Global Commodity Prices are Likely to Unemployment Challenge, Which Has Been Keep Pressure on the Country’s External and exacerbated by the Pandemic Shock. Inflation Outlook in the Near-Term. Unemployment rate Global commodity prices and their outlook %, based on labor force surveys average US$ prices in 2019–100 225 Sri Lanka 200 Philippines 175 Saudi Arabia 150 Egypt Croatia 125 Turkey 100 Albania 75 Morocco 50 Tunisia 25 Jordan 2019 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 2022 0 5 10 15 20 25 30 Start, Q4–19 Latest, Q4(Q1)–21(22) Cereals Fat oils Crude oil Peak Base metals Beverages Agri raw materials Ongoing War between Ukraine-Russia and its Together, Higher Global Prices Along with Added Impact on Global Commodity Prices is Tightening Global Financial Conditions Present Likely to Keep Jordan’s Import Bill at an Elevated a Rocky Path to the Near-Term Recovery in the Level for Another Year. EMEs, Including Jordan. Jordan's food import dependence Outlook for the EME's growth and US Fed rate imports as % of domestic consumption, 2020 data % annual growth, end period policy rate, IMF WEO Apr 22 7.5 Sunflower oil 6.0 4.5 IMF Barley projections 3.0 made at the beginning of 1.5 2021 Maize 0.0 Wheat –1.5 –3.0 0 20 40 60 80 100 2015 2016 2017 2018 2019 2020 2021 2022 o/w: from Ukraine o/w: from Russia EMEs Real GDP growth o/w: from Rest of the World US Fed policy rate Sources: Haver, IMF, CBJ, DoS, World Bank’s Global Economic Prospects, IMF’s World Economic Outlook, USDA and World Bank staff calculations. xiv JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION ‫الملخص التنفيذي‬ ‫ال يزال التعايف االقتصادي لألردن من الجائحة معتدالً‪ ،‬وإن كان‬ ‫واسع النطاق‪ .‬مقابل انكامش بنسبة ‪ 1.6‬يف املائة يف عام ‪ ،2020‬سجل‬ ‫وا قويًا بنسبة ‪ 2.2‬يف املائة العام املايض‪ ،‬وهو أعىل بقليل‬ ‫االقتصاد من ً‬ ‫ي الوقت الذي ال تزال فيه حالة عدم اليقني بشأن جائحة‬ ‫كوفيد ‪ -19‬مستمرة‪ ،‬فإن االقتصاد العاملي مهيأ ملواجهة جولة‬ ‫جديدة من التأثريات املعاكسة‪ .‬وتشري التقديرات األخرية من‬ ‫ف‬ ‫من املتوسط البالغ ‪ 2.1‬يف املائة املسجل خالل السنوات الخمس السابقة‬ ‫صندوق النقد الدويل‪ 12‬إىل أن االقتصاد العاملي سجل انتعاشً ا قويًا العام‬ ‫ما إىل حد كبري بالتأثريات املتأخرة‬ ‫للجائحة‪ .‬وكان هذا االنتعاش مدعو ً‬ ‫املايض‪ ،‬بعد االنكامش غري املسبوق الناجم عن الجائحة‪ .‬أتاح تحسني‬ ‫ملزيج من السياسات النقدية واملالية التيسريية ولكن الحكيمة‪ ،‬جنبًا إىل‬ ‫طرح اللقاح‪ ،‬إىل جانب التداعيات اإليجابية للسياسات املالية والنقدية‬ ‫جنب مع االنتعاش يف الطلب املحيل نتيجة إلعادة االنفتاح التدريجي‬ ‫يا فوريًا وقويًا‪ .‬ومع ذلك‪ ،‬ال يزال هذا االنتعاش الناشئ‬ ‫التيسريية‪ ،‬تعاف ً‬ ‫لالقتصاد وسط وترية متزايدة لعمليات إعطاء اللقاحات‪.‬‬ ‫ِ‬ ‫غري ثابت مع وجود تباين كبري يف الوترية لُوحظ بني االقتصادات املتقدمة‬ ‫وانعكاسا لهذه التطورات اإليجابية‪ ،‬شهدت القطاعات الفرعية‬ ‫ً‬ ‫‪13‬‬ ‫واألسواق الناشئة‪.‬‬ ‫عا واسع النطاق‪ .‬كان االنتعاش يف قطاعي السفر‬ ‫للصناعة والخدمات توس ً‬ ‫باإلضافة إىل ذلك‪ ،‬كان االنتعاش مصحوبًا أيضً ا بضغوط تضخمية‬ ‫عا للغاية عىل الرغم من التحديات‬ ‫والسياحة عىل وجه الخصوص‪ ،‬مشج ً‬ ‫عاملية‪ .‬وقد تعززت هذه الضغوط بسبب ارتفاع أسعار السلع العاملية‬ ‫الكبرية بسبب اإلغالق املتقطع‪ .‬ويف عام ‪ ،2021‬زادت عائدات السائحني‬ ‫وارتفاع تكاليف النقل‪ .‬وللسيطرة عىل التضخم املتزايد‪ ،‬بدأت العديد‬ ‫بنسبة ‪ 96‬يف املائة‪ ،‬لتصل إىل حوايل نصف مستوى عام ‪ .2019‬عالوة عىل‬ ‫من البنوك املركزية ‪ -‬مبا يف ذلك البنوك الرئيسية ‪ ،‬يف تشديد موقف‬ ‫ذلك‪ ،‬ساهم انتعاش النشاط االقتصادي أيضً ا يف زيادة اإليرادات الرضيبية‪،‬‬ ‫سياستها النقدية‪.‬‬ ‫مام ساعد يف جهود ضبط أوضاع املالية العامة بشكل عام‪.‬‬ ‫ويف خضم هذه التطورات وتأثريها الالحق عىل االقتصاد العاملي‬ ‫ومع ذلك‪ ،‬أدت الطاقة الفائضة يف االقتصاد إىل انتعاش ضعيف‬ ‫‪ ،‬جاءت انتكاسة أخرى مع الغزو الرويس ألوكرانيا‪ .‬تسببت الحرب يف‬ ‫يف الوظائف‪ ،‬ال سيام بني الشباب‪ .‬بلغ معدل البطالة اإلجاميل يف البالد‬ ‫اضطرابات كبرية يف اإلمدادات‪ ،‬مام أدى إىل ارتفاع تاريخي يف أسعار عدد‬ ‫حوايل ‪ 23‬يف املائة يف نهاية عام ‪ ،2021‬مقارنة مبستوى ما قبل الجائحة‬ ‫من السلع‪ .‬وقد أضاف هذا طبقة أخرى من التأثريات املعاكسة آلفاق‬ ‫البالغ ‪ 19‬يف املائة يف نهاية عام ‪ .2019‬ومع ذلك‪ ،‬ساعد التعايف يف قطاع‬ ‫النمو العاملي الناشئة وكذلك الضغوط التضخمية‪ .‬ويف هذا السياق‪ ،‬من‬ ‫الخدمات يف تخفيف بعض الضغط من سوق العمل‪ ،‬عندما بلغت‬ ‫املرجح أن تشكل االختناقات الناشئة يف سلسلة التوريد بسبب سياسة‬ ‫البطالة ذروتها عند ‪ 25٪‬يف الربع األول من عام ‪ .2022‬ومع ذلك‪ ،‬ال‬ ‫انعدام فايروس كورونا يف الصني‪ ،‬تحديًا إضاف ً‬ ‫يا لالنتعاش العاملي‪.‬‬ ‫تزال مستويات البطالة مرتفعة بشكل ملحوظ يف األردن مقارنة بنظرياتها‬ ‫با عميقة فيام يتعلق بالوظائف‬ ‫يف املنطقة‪ .‬يف الواقع‪ ،‬ترك الوباء ندو ً‬ ‫ ‪12‬آفاق االقتصاد العاملي صندوق النقد الدويل (‪ ، )WEO‬أبريل‪/‬نيسان ‪.2022‬‬ ‫للشباب الذين يشكلون حوايل خمس إجاميل السكان يف سن العمل يف‬ ‫ ‪13‬وفقًا لصندوق النقد الدويل‪ ،‬فإن النقص يف االقتصادات املتقدمة بالنسبة التجاه‬ ‫را من نهاية عام ‪ ،2021‬أشارت اإلحصاءات الرسمية إىل أن‬ ‫األردن‪ .‬اعتبا ً‬ ‫ما قبل الجائحة سوف يقل خالل آفاق التنبؤ‪ .‬ومع ذلك‪ ،‬يف األسواق الناشئة‬ ‫أكرث من نصف الشباب يف البالد عاطلون عن العمل‪ .‬وكان هذا التأثري‬ ‫واالقتصادات النامية‪ ،‬من املتوقع أن يظل النشاط االقتصادي دون االتجاه السابق‬ ‫أكرث وضوحا بني العامالت الشابات‪ .‬ومن ثم‪ ،‬ال يزال الفرق بني الجنسني‬ ‫للوباء طوال آفاق التنبؤ بسبب خسائر أكرب نسبيا يف رأس املال البرشي واالستثامر‬ ‫واضحا يف سوق العمل األردين‪ ،‬حيث تقل نسبة مشاركة اإلناث يف العمل‬ ‫وزيادة محدودية دعم السياسات وتباطؤ التلقيح‪( .‬صندوق النقد الدويل‪ ،‬آفاق‬ ‫بنحو ‪ 40‬نقطة مئوية عن معدالت مشاركة الذكور‪ ،‬مام يجعلها من بني‬ ‫االقتصاد العاملي‪ ،‬أبريل‪/‬نيسان ‪.)2022‬‬ ‫امللخص التنفيذي‬ ‫‪xv‬‬ ‫خالل التحسن الكبري يف إجاميل االحتياطيات األجنبية الرسمية للبنك‬ ‫التثبيت الفعال من خالل ربط الدينار إىل تعزيز ثقة السوق التي تشتد‬ ‫املركزي األردين‪ ،‬والتي وصلت إىل ‪ 19‬مليار دوالر أمرييك يف نهاية عام‬ ‫‪18‬‬ ‫الحاجة إليها‪.‬‬ ‫عا بنحو ‪ 2.1‬مليار دوالر أمرييك عن مركز نهاية عام ‪.2020‬‬ ‫‪ .2021‬ارتفا ً‬ ‫كان موقف السياسة النقدية التيسريية للبنك املركزي األردين‬ ‫وبدعم من االلتزامات القوية املتعددة األطراف والثنائية‪ ،‬ساعد التحسن‬ ‫ما عىل نطاق واسع باإلدارة املالية الحكيمة‪ .‬وقد أدى ذلك بدوره‬ ‫مدعو ً‬ ‫امللحوظ يف االحتياطيات األجنبية للبنك املركزي األردين السلطات عىل‬ ‫إىل زيادة قوية يف اإليرادات الرضيبية وغري الرضيبية‪ .‬وبالفعل‪ ،‬تجاوز‬ ‫تلبية أهداف االحتياطيات الدولية الصافية لربنامج صندوق النقد الدويل‬ ‫التحصيل من الرضائب املبارشة وغري املبارشة األهداف املتوخاة يف موازنة‬ ‫بهامش مريح ‪ -‬وهو مؤرش مهم يعكس االستقرار الخارجي‪ .‬وعالوة عىل‬ ‫عام ‪ .2021‬وباإلضافة إىل التوسع يف الناتج االقتصادي‪ ،‬فقد ساهم تحسني‬ ‫ذلك‪ ،‬تشري مقاييس كفاية االحتياطيات القياسية أيضً ا إىل أن إجاميل‬ ‫االمتثال واإلدارة أيضً ا يف زيادة تحصيل اإليرادات يف العام املايض‪ .‬من‬ ‫االحتياطيات األجنبية الرسمية للبنك املركزي األردين ظل يف مستوى‬ ‫ما قويًا بالوفاء بأهداف‬ ‫ناحية اإلنفاق‪ ،‬أظهرت الحكومة األردنية التزا ً‬ ‫مريح حتى باملقارنة مع معظم البلدان اإلقليمية والدول النظرية يف‬ ‫برنامج ‪ .IMF-EFF‬ظل اإلنفاق الجاري واإلنفاق الرأساميل يف الجانب‬ ‫الفرتات األخرية‪.‬‬ ‫األدىن من أهداف املوازنة لعام ‪ .2021‬ومع ذلك‪ ،‬ال يزال اإلنفاق الرأساميل‬ ‫دا‪ ،‬من املتوقع أن يحافظ االقتصاد األردين عىل‬ ‫من اآلن فصاع ً‬ ‫يصل إىل ‪ 3.5٪‬من إجاميل الناتج املحيل‪ ،‬وهو أعىل مستوى له يف السنوات‬ ‫الزخم األخري‪ ،‬ولكن من املرجح أن تؤدي التأثريات املعاكسة العاملية‬ ‫األربع املاضية‪ .‬وهذا تطور مرحب به بالنظر إىل الدور الحاسم لالستثامر‬ ‫إىل بعض الرتاجع‪ .‬ومثل االقتصادات الناشئة األخرى التي تعتمد عىل‬ ‫العام يف إنعاش النشاط االقتصادي والتشغيل‪ .‬وبشكل عام‪ ،‬أشار العجز‬ ‫االسترياد‪ ،‬تواجه التوقعات االقتصادية لألردن عىل املدى القريب تحديات‬ ‫املايل للحكومة املركزية‪( 19‬مبا يف ذلك املنح) إىل تحسن ملحوظ يف عام‬ ‫كبرية بسبب التطورات العاملية األخرية‪ .‬وهذا يشمل تأثري الحرب يف‬ ‫‪ ،2021‬حيث وصل إىل ‪ 5.7‬يف املائة من الناتج املحيل اإلجاميل‪ ،‬وهو‬ ‫أوكرانيا عىل أسعار الغذاء والطاقة العاملية‪ .‬قد تؤدي هذه التطورات‬ ‫أقل بنسبة ‪ 1.6‬و ‪ 0.4‬نقطة مئوية من أهداف موازنة ‪ 2020‬و ‪2021‬‬ ‫مجتمعة إىل الحفاظ عىل ارتفاع أرقام القطاع الخارجي للبالد ملدة عام‬ ‫عىل التوايل‪ .‬واألهم من ذلك‪ ،‬انعكست تطورات مامثلة يف حالة ميزان‬ ‫آخر إىل جانب تباطؤ االقتصاد املحيل‪ .‬وميكن أن تصبح تلبية احتياجات‬ ‫املالية العامة األويل للحكومة املركزية (‪ .)CG‬ومع ذلك‪ ،‬ال يزال الضغط‬ ‫التمويل الخارجي املتزايدة أكرث صعوبة إذا تسارع حجم ورسعة رفع‬ ‫املتزايد من الخصوم الطارئة للقطاع العام يشكل مصدر قلق‪ .‬ساعد إىل‬ ‫سعر الفائدة من قبل بنك االحتياطي الفيدرايل األمرييك للحد من ارتفاع‬ ‫حد ما‪ ،‬التحول االقتصادي القوي وجهود التوحيد يف إبطاء تراكم نسبة‬ ‫التضخم املحيل‪ .‬ومن أجل مواجهة هذه الضغوط املحتملة‪ ،‬تحتاج‬ ‫الدين إىل إجاميل الناتج املحيل مقارنة باالرتفاع الذي حدث خالل عام‬ ‫السلطات إىل معايرة مزيج حكيم من سياسات االقتصاد الكيل‪ .‬هذا مهم‬ ‫‪ .2020‬ونتيجة لذلك‪ ،‬بلغ إجاميل الدين الحكومي‪ 20‬واملضمون ‪113.8٪‬‬ ‫يف سياق معالجة مخاطر االستقرار النقدي واملايل الكامنة التي قد تبقى‬ ‫من إجاميل الناتج املحيل يف عام ‪ 2021‬مقارنة بـ ‪ 109.0٪‬من الناتج املحيل‬ ‫‪21‬‬ ‫غري ملحوظة بسبب التدابري املالية الداعمة واملستهدفة األخرية‪.‬‬ ‫اإلجاميل يف عام ‪ ،2020‬يف حني بلغ صايف الدين من حيازات ديون صندوق‬ ‫من املتوقع أن يصل النمو عىل املدى املتوسط إىل ‪ 2.3‬يف املائة‪.‬‬ ‫الضامن االجتامعي ‪ 92٪‬من إجاميل الناتج املحيل مقارنة بـ ‪ 88.0٪‬من‬ ‫وما مل يتم ترسيع اإلصالحات الهيكلية لتعزيز النمو واالستثامر بقيادة‬ ‫إجاميل الناتج املحيل يف عام ‪.2020‬‬ ‫القطاع الخاص‪ ،‬فمن املرجح أن تظل آفاق النمو عىل املدى املتوسط‬ ‫عىل الرغم من الحصافة املالية‪ ،‬أدت رشوط التبادل التجاري غري‬ ‫مقيدة بالعوائق الهيكلية طويلة األمد‪ ،‬إىل جانب التأثريات الخارجية‬ ‫املواتية إىل اتساع كبري يف عجز الحساب الجاري‪ .‬حدث هذا عىل الرغم من‬ ‫املعاكسة‪ .‬عالوة عىل ذلك‪ ،‬فإن عدم اليقني بشأن التطورات العاملية يشكل‬ ‫النمو الكبري يف الصادرات يف عام ‪ .2021‬يف الواقع‪ ،‬سجل العجز التجاري‬ ‫للسلع زيادة تاريخية خالل عام ‪ .2021‬عىل وجه التحديد‪ ،‬ظل النمو يف‬ ‫الواردات غري املتعلقة بالطاقة قوياً حيث أظهرت أنشطة التصنيع انتعاشً ا‬ ‫ومتت زيادته مبقدار ‪ 200‬مليون دوالر أمرييك يف يونيو‪/‬حزيران ‪ .2021‬وتوصل‬ ‫يا بعد أن وصلت أدىن املستويات أثناء الجائحة‪ .‬وأشارت التقديرات‬ ‫قو ً‬ ‫األردن وصندوق النقد الدويل إىل اتفاق عىل مستوى خرباء الصندوق بشأن‬ ‫إىل أن حوايل ربع التدهور يف عجز التجارة السلعية يف عام ‪ 2021‬ميكن‬ ‫املراجعة الرابعة يف ‪ 24‬مايو‪/‬أيار ‪.2022‬‬ ‫تفسريه باالرتفاع يف أسعار السلع األساسية العاملية‪ .‬عالوة عىل ذلك‪،‬‬ ‫ ‪18‬وانعكاسا لهذه التطورات‪ ،‬أكدت وكالة التصنيف فيتش يف ديسمرب‪/‬كانون أول‬ ‫تجاوز التعايف يف إيرادات السفر يف عام ‪ 2021‬التوقعات‪ ،‬لكن املستويات‬ ‫‪ ،2021‬التصنيف االفرتايض للمصدر األردين عند ‘‪ ’-BB‬وعدلت نظرتها املستقبلية‬ ‫ظلت أقل بكثري من مستويات ما قبل الجائحة‪ .‬ومع ذلك‪ ،‬حتى هذا‬ ‫إىل مستقرة من سلبية‪ .‬عالوة عىل ذلك‪ ،‬يف مارس‪/‬اذار ‪ ،2022‬أكدت وكالة ستاندرد‬ ‫يا زيادة حادة يف تكلفة النقل العاملية بسبب األنشطة‬ ‫التحسن قابله جزئ ً‬ ‫آند بورز (‪ )S&P‬التصنيف االئتامين السيادي لألردن ‪ ،B+/B‬وحافظت عىل نظرة‬ ‫مستقبلية مستقرة‪.‬‬ ‫عطِّلَة يف املوانئ العاملية الرئيسية‪ .‬ومن ناحية أخرى‪ ،‬أشارت تحويالت‬ ‫امل ُ َ‬ ‫ ‪19‬حسب تصنيف إحصائيات مالية الحكومة لصندوق النقد الدويل‪.‬‬ ‫العامل إىل انتعاش هاميش حيث أدت مخاوف فايروس كورونا املستجد‬ ‫ ‪20‬يتبع تعريف الدين يف هذا التقرير إحصاءات مالية الحكومة لصندوق النقد‬ ‫بشأن جزء من متغريات دلتا وأوميكرون إىل إعادة فتح تدريجية يف‬ ‫ء عىل التقرير القطري‬ ‫الدويل ‪ ،‬وبالتايل يشمل توريق املتأخرات املحلية بنا ً‬ ‫نا املنح)‬ ‫بلدان املصدر‪ .‬وبشكل عام ‪ ،‬بلغ عجز الحساب الجاري (متضم ً‬ ‫لصندوق النقد الدويل رقم ‪.4/22‬‬ ‫‪ 8.8٪‬من الناتج املحيل اإلجاميل يف عام ‪ 2021‬مقارنة بـ ‪ 5.7٪‬من إجاميل‬ ‫ ‪21‬مدد البنك املركزي األردين تأجيل سداد الديون من قبل املقرتضني املترضرين إىل‬ ‫الناتج املحيل يف عام ‪.2020‬‬ ‫البنوك من يونيو‪/‬حزيران إىل نهاية عام ‪ .2021‬ومن ثم‪ ،‬فمن املرجح أن تظهر أي‬ ‫عىل الرغم من ارتفاع عجز الحساب الجاري‪ ،‬أنهى األردن‬ ‫آثار محتملة عىل جودة األصول للجائحة بعد هذه الفرتة فقط‪.‬‬ ‫عام ‪ 2021‬مبركز قوي يف جانب الشؤون الخارجية‪ .‬وينعكس ذلك من‬ ‫‪xvi‬‬ ‫‪JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION‬‬ ‫الخاص يف األردن ال يستفيد بشكل كامل من الطاقة اإلنتاجية الحالية‪،‬‬ ‫أدىن املعدالت يف العامل‪ .‬وتساهم عدة عوامل يف ذلك‪ :‬ظروف مكان‬ ‫حيث سجل متوسط استخدام الطاقة أقل من ‪ 8‬نقاط مئوية من متوسط‬ ‫العمل غري املالمئة لألرسة‪ ،‬اإلرشاك املايل املحدود الالزم لتعزيز ريادة‬ ‫منطقة الرشق األوسط وشامل إفريقيا و‪ 13‬نقطة أقل من البلدان ذات‬ ‫األعامل‪ ،‬واألعراف االجتامعية‪ ،‬ومجموعة من القيود القانونية التي تؤثر‬ ‫الدخل املتوسط األعىل‪ .‬ووفقًا لتشخيص القطاع الخاص يف األردن لعام‬ ‫عىل وصول املرأة إىل الفرص االقتصادية‪ ،‬كام يتضح من مؤرش املرأة‬ ‫‪ ،202114‬فإن القيود الرئيسية التي تحد من قدرة القطاع الخاص عىل توليد‬ ‫واألعامل والقانون لعام ‪ 2022‬الذي يضع األردن بني العرشة يف املائة‬ ‫الوظائف واملنافسة يف األسواق الدولية هي تكاليف األعامل املرتفعة‪،‬‬ ‫ء‪ .‬وهناك أيضً ا قيود محددة تؤثر عىل النساء بشكل غري‬ ‫من األدىن أدا ً‬ ‫وعدم القدرة عىل التنبؤ بالسياسات ومخاطر االستثامر‪ ،‬والتجزئة املفرطة‬ ‫متناسب‪ ،‬مثل عدم توفر رعاية أطفال ميسورة التكلفة وعالية الجودة‬ ‫لسوق العمل‪ ،‬وأوجه القصور املتعلقة باملنافسة يف السوق‪.‬‬ ‫ووسائل نقل عام موثوقة وآمنة‪.‬‬ ‫عىل الرغم من التغريات غري املواتية يف األسعار العاملية للسلع‬ ‫يركز تقرير الرتكيز الخاص «خلق وظائف أكرث وأفضل يف األردن»‬ ‫األساسية‪ ،‬ظل انتقال التغريات إىل األسعار املحلية ضعيفًا‪ .‬عىل الرغم‬ ‫عىل التحديات الهيكلية الرئيسية يف سوق العمل األردين باإلضافة إىل‬ ‫من االنتعاش عىل نطاق واسع‪ ،‬فإن الناتج يف القطاعات الفرعية الرئيسية‬ ‫اإلصالحات املطلوبة للتغلب عليها‪ .‬يتسم سوق العمل األردين مبستويات‬ ‫مل يصل بعد إىل مستويات ما قبل الجائحة خالل عام ‪ .2021‬ظل التضخم‬ ‫عالية من البطالة والطابع غري الرسمي‪ .‬هذه الفجوات ناتجة إىل حد‬ ‫األسايس الذي يعكس هذا الركود يف االقتصاد‪ ،‬عند مستويات منخفضة‬ ‫كبري عن القدرة املحدودة للقطاع الخاص عىل خلق وظائف أكرث وأفضل‪.‬‬ ‫عىل الرغم من الزيادة اإلجاملية يف التضخم العام من ‪ 0.3‬يف املائة يف عام‬ ‫وعادة ما يتم إعاقة خلق فرص عمل أكرث بسبب الهيكل اإلنتاجي الذي‬ ‫‪ 2020‬إىل ‪ 1.4٪‬يف عام ‪ .2021‬وباإلضافة إىل ضعف الطلب املحيل‪ ،‬ساعد‬ ‫تهيمن عليه الرشكات الصغرية منخفضة اإلنتاجية ‪ -‬نتيجة ديناميكيات‬ ‫بطؤ انتقال التغريات اىل األسعار املحلية جنبًا إىل جنب مع بعض ضوابط‬ ‫الرشكات غري الفعالة‪ .‬وبالتايل‪ ،‬فإن خلق وظائف أكرث وأفضل يف األردن‬ ‫األسعار‪ ،‬عىل التخفيف من الزيادة األساسية يف مسار التضخم يف األردن‬ ‫يتطلب أوالً وقبل كل يشء إصالحات من شأنها زيادة املنافسة يف السوق‬ ‫خالل عام ‪ 2021.15‬ومع ذلك‪ ،‬باإلضافة إىل كونها مشوهة إلشارات السوق‪،‬‬ ‫من خالل الحد من التشوهات التي تسببها الدولة‪ .‬يجب أن يكون هذا‬ ‫قد ال تكون ضوابط األسعار طريقة مستدامة للتعامل مع التضخم‪.‬‬ ‫مصحوبًا بجهود لتحسني مهارات القوى العاملة‪ ،‬وسياسات عمل تسهل‬ ‫أبقى البنك املركزي األردين عىل موقف سياسته النقدية‬ ‫خلق فرص العمل مع حامية العامل‪ ،‬فضالً عن تدابري محددة لخلق‬ ‫متكيفًا عىل نطاق واسع لدعم االنتعاش الناشئ وسط معدالت البطالة‬ ‫الفرص ورفع القيود عن توظيف اإلناث‪ .‬يف حني أن األعراف االجتامعية‬ ‫املرتفعة‪ .‬أبقى البنك املركزي األردين عىل أسعار الفائدة الرئيسية دون‬ ‫هي عامل مسبب كبري للمعدالت املنخفضة ملشاركة املرأة يف العمل‪ ،‬فإن‬ ‫تغيري خالل عام ‪ .2021‬وتم تخفيض األسعار آخر مرة يف مارس‪/‬اذار‬ ‫التجربة العاملية تُظْهِر أن املعايري تتغري مع انضامم املزيد من النساء إىل‬ ‫‪ 2020.16‬بهدف حامية ربط الدينار بالدوالر األمرييك ‪ ،‬والحفاظ عىل‬ ‫القوى العاملة‪ .‬وبالتايل‪ ،‬ميكن خلق املزيد من الفرص لإلناث من خالل‬ ‫قوة وجاذبية األصول املقومة بالدينار مقابل األصول املقومة بعمالت‬ ‫رفع قيود معينة عىل توظيف اإلناث‪ ،‬مثل إزالة القيود القانونية املتعلقة‬ ‫أخرى ‪ ،‬وللمساعدة يف تثبيت الضغوط التضخمية املتزايدة تدريجياً ‪،‬‬ ‫بالحصول عىل وظيفة‪ ،‬وتوسيع نطاق الوصول إىل رعاية جيدة لألطفال‪،‬‬ ‫قام البنك املركزي األردين برفع أسعار الفائدة الرئيسية مبقدار ‪ 25‬نقطة‬ ‫وزيادة اإلرشاك املايل للمرأة‪.‬‬ ‫أساس يف مارس‪/‬آذار ‪ 2022‬و ‪ 50‬نقطة أساس يف مايو‪/‬أيار ‪ ، 2022‬مام‬ ‫يُظهر القطاع الخاص األردين عالمات تشري اىل عجز يف النمو‪.‬‬ ‫أدى إىل نقل سعر الفائدة األسايس للبنك املركزي األردين إىل ‪ 3.25‬يف‬ ‫وتشري الدالئل املستمدة من استبيان متابعة كوفيد ‪ 19‬الرابع للبنك الدويل‬ ‫املائة‪ .‬بشكل عام‪ ،‬منا االئتامن املقدم لالقتصاد بنحو ‪ 5‬يف املائة يف عام‬ ‫(يرجى الرجوع اىل املربع ‪ ،)2‬إىل أنه ألول مرة منذ بداية الجائحة‪ ،‬ت ُظهر‬ ‫‪ ،2021‬عالوة عىل زيادة بنسبة ‪ 5.7‬يف املائة تم تسجيلها يف عام ‪.2020‬‬ ‫نسبة الرشكات التي تم «تأكيد إغالقها» انخفاضً ا طفيفًا‪ .‬ومع ذلك‪ ،‬بينام‬ ‫ويعكس بصورة جزئية‪ ،‬التباطؤ يف منو االئتامن مع حدوث االنتعاش‬ ‫ت ُظهر الرشكات الصغرية عالمات انتعاش ضعيفة‪ ،‬أصبح االنخفاض يف‬ ‫يرا للتدابري املساندة املتعلقة‬ ‫االقتصادي‪ ،‬تخفيفا تدريجيا ولكن ُ‬ ‫معا َ‬ ‫املبيعات الشهرية للرشكات الكبرية أكرث وضو ً‬ ‫حا‪.‬‬ ‫بفريوس كورونا املستجد التي تم تقدميها من البنك املركزي األردين‪.‬‬ ‫عالوة عىل ذلك‪ ،‬وعىل الرغم من االنتعاش االقتصادي األسايس‪،‬‬ ‫وعالوة عىل ذلك‪ ،‬ساعدت أيضً ا اإلدارة النقدية الحكيمة أثناء الجائحة‬ ‫أبلغت جميع الرشكات عن انخفاض متسارع يف القوى العاملة لديها‬ ‫ومرحلة التعايف يف إغالق املراجعة الرابعة لربنامج تسهيل الصندوق‬ ‫حا بالنسبة للرشكات الصغرية والرشكات‬ ‫بدوام كامل‪ ،‬وهو ما كان أكرث وضو ً‬ ‫املمدد لصندوق النقد الدويل ‪ IMF-EFF.17‬وقد أدى ذلك إىل جانب‬ ‫العاملة يف قطاع الخدمات‪ .‬ومن املحتمل أن يعكس هذا طبيعة صدمة‬ ‫كوفيد ‪ 19‬التي أثرت سلبًا وبشكل أكرث كثافة عىل القطاعات كثيفة‬ ‫ول أيضً ا تحديات‬ ‫االتصال‪ ،‬مثل الخدمات‪ .‬وقد يفرس هذا االنتعاش املُطَ َّ‬ ‫ ‪14‬مجموعة البنك الدويل‪ .‬تشخيص القطاع الخاص يف البالد‪ .‬إنشاء أسواق يف‬ ‫سوق العمل املستمرة التي تجعل معدالت البطالة ثابتة‪.‬‬ ‫األردن‪ .‬واشنطن العاصمة (البنك الدويل‪)2021 ،‬‬ ‫بشكل عام‪ ،‬تشري االتجاهات طويلة األمد يف أداء القطاع الخاص‬ ‫ ‪15‬التقرير القطري لصندوق النقد الدويل رقم ‪.4/22‬‬ ‫وبيئة األعامل يف األردن إىل أن الجائحة أدت إىل تفاقم الفجوة اإلقليمية‬ ‫ ‪16‬تم تخفيض السعر الرئييس للبنك املركزي األردين مبقدار ‪ 150‬نقطة أساس ليصل‬ ‫والعاملية للقطاع الخاص األردين من حيث النمو واألداء‪ .‬تكشف املقاييس‬ ‫إىل ‪ 2.5‬يف املائة يف مارس‪/‬اذار ‪.2020‬‬ ‫عىل مستوى الرشكات التي تم الحصول عليها يف مسح املنشآت ‪2013‬‬ ‫ ‪17‬دخل األردن يف برنامج تسهيل الصندوق املمدد لصندوق النقد الدويل ‪IMF-‬‬ ‫و‪ 2019‬أن القدرة التنافسية للقطاع الخاص األردين آخذة يف االنخفاض‬ ‫‪ EFF‬مدته أربع سنوات يف مارس‪/‬اذار ‪ 2020‬مببلغ يقارب ‪ 1.3‬مليار دوالر أمرييك‪،‬‬ ‫حتى قبل بداية صدمة كوفيد ‪ .19‬عىل سبيل املثال‪ ،‬يبدو أن القطاع‬ ‫امللخص التنفيذي‬ ‫‪xvii‬‬ ‫هذه اإلصالحات األردن من معالجة األوضاع امللحة للبطالة وسوق‬ ‫مخاطرا متوسطة املدى عىل مستقبل األردن‪ .‬واآلثار السلبية التي تنشأ‬ ‫العمل يف البالد‪ ،‬وخاصة بالنسبة للنساء والشباب‪ .‬ميكن لهذه الجهود‪،‬‬ ‫عىل الصعيد العاملي نتيجة للغزو الرويس ألوكرانيا هي تأثريات معاكسة‬ ‫با إىل جنب مع قطاع خاص أكرث ديناميكية‪ ،‬زيادة كفاءة استخدام‬ ‫جن ً‬ ‫كبرية لدولة صغرية مستوردة للنفط مثل األردن‪ .‬ومتثل اختناقات العرض‬ ‫املوارد يف القطاعات اإلنتاجية‪ ،‬مام يؤدي إىل زيادة اإلنتاج والنمو‪ .‬ثالثًا‪،‬‬ ‫املستمرة التي تؤدي إىل تعطيالت إضافية يف التجارة الدولية‪ ،‬والضغوط‬ ‫سيتعني عىل األردن االنتقال إىل إطار سياسة االقتصاد الكيل ملا بعد األزمة‪،‬‬ ‫التضخمية املتسارعة‪ ،‬والقيود اإلضافية املتعلقة باملناخ‪ ،‬مخاطرا بحدوث‬ ‫وخاصة ملواءمة األداء املايل والتضخم مع مجموعة الظروف الجديدة التي‬ ‫تطورات سلبية إضافية محتملة‪.‬‬ ‫يواجهها‪ .‬عىل سبيل املثال‪ ،‬يجب أن يتزامن املزيد من االستثامر العام‬ ‫إن وجود أجندة إصالح أكرث حزماً ومتكينا لالستثامر‪ ،‬من شأنه‬ ‫األكرث كفاءة وفعالية مع عدد أقل من ضوابط األسعار‪ ،‬لضامن أن تكون‬ ‫أن يساعد األردن عىل إدارة االضطرابات وعدم اليقني بشكل أفضل‪ .‬أوالً‪،‬‬ ‫عا‪ ،‬سيتعني‬ ‫اإلشارات املتعلقة باالستثامر واألسعار يف االقتصاد كافية‪ .‬وراب ً‬ ‫يحتاج األردن إىل مواجهة أجندة إصالح االقتصاد الجزيئ لتنشيط إنشاء‬ ‫عىل األردن الرتكيز عىل تجديد اسرتاتيجيته لتمويل الديون للحفاظ عىل‬ ‫الرشكات الخاصة وتشغيلها‪ ،‬وعند الحاجة‪ ،‬خروجها من جميع القطاعات‪،‬‬ ‫االستثامرات العامة يف البنية التحتية وتنمية رأس املال البرشي‪.‬‬ ‫يا‪ ،‬ستمكّن‬ ‫مع بذل جهود أكرث حز ً‬ ‫ما واستدامة لرتسيخ تكافؤ الفرص‪ .‬ثان ً‬ ‫‪xviii‬‬ ‫‪JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION‬‬ 1 ECONOMIC UPDATE Real and Labor Sector contribution during 2021 came from the industrial sector at 0.7 percentage points—its highest growth Jordan’s economy registered a strong rebound in contribution in a decade—led by manufacturing and 2021. Real GDP grew by 2.2 percent, following its mining, while the agriculture sector at 0.1 percentage 1.6 percent contraction in 2020. Recovery remained points made a marginal contribution. strongest during the second quarter, at 3.2 percent All sectors of the economy reached or (year on year), while retaining a firm momentum in exceeded their pre-pandemic levels.25 Nonethe- the latter half of the year as the economy grew by 2.7 less, many subsectors did not catch up to their percent and 2.6 percent during Q3 and Q4 (year on pre-pandemic capacity (Figure 3). Among them, the year). This resilience was remarkable as Jordan faced restaurants & hotels subsector came to the fore with two sizable waves of COVID-19 infections, one during a gap of almost 6 percent from the pre-pandemic March and the other in December, 2021.22 As a result, level despite the recent recovery of travel and Jordan’s recovery gap—the difference between real GDP and its pre-pandemic trend—narrowed to 3.7 22 The second wave occurred in March, peaking at 812 percent by the last quarter from 4.1 percent in Q4- daily new cases per million people, and the third wave 2020 (Figure 1).23 in December, peaking at 485 daily new cases per million On the supply side, services and manufac- people. turing sectors supported the recovery. The services 23 The recovery gap was calculated based on the pre- sector, with 60 percent24 share in total output, made pandemic trend of real GDP using X-13 ARIMA-SEATS model. the largest contribution to growth during the year at 24 Share of GDP at market prices. 1.1 percentage points (Figure 2). Within this sector, 25 This section refers to quarterly statistics from Q4-2019 finance & insurance, real estate, and government ser- and annual statistics from 2019 as the pre-pandemic vices subsectors led the rebound. The second largest (pre-COVID) level. 1 FIGURE 1 • Recovery Gap FIGURE 2 • Growth Contribution from the (JD Million; Seasonal Adjusted) Supply side (percentage Points/percent) 8,000 4.0 7,800 7,600 2.0 recovery gap 7,400 0.0 7,200 recovery speed –2.0 7,000 –4.0 Q1-2018 Q2-2018 Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2019 2020 2021 Real GDP forecast using pre-crisis trend Agriculture Industry Services Real GDP (seasonally adjusted) Net Taxes Real GDP Source: DoS and World Bank staff calculations. Source: DoS and World Bank staff calculations. FIGURE 3 • Growth of Subsectors Vis-à-Vis 2019 private sector recovery remains limited at best (see Percentage Change Compared to Box 2). 2019 (pre-Pandemic Level) Nevertheless, despite this bounce-back, pressing socioeconomic challenges such Agriculture 4.4 Mining & Quarrying 9.6 as high unemployment and low labor force Industry Electricity & Water 0.3 participation remain firmly entrenched. The Construction –0.1 unemployment rate during Q4-2021 stood at 23 per- Manufacturing –0.4 Finance & Insurance 7.3 cent, 4 percentage points above the pre-pandemic Bank Service Charge 6.5 level, though marginally lower than the same period Government Services 2.4 Real Estate 1.9 in 2020 (Figure 4). Youth unemployment (15–24 Services Domestic Services 0.2 years of age) reached unprecedented 52 percent or Wholesale and Retail –0.2 11 percentage points higher than the pre-pandemic Private Non-Profit Services –0.8 Social & Personal Services –2.3 level. Even when job seekers find employment, Transport & Communications –3.0 informality in the labor market remains widespread Restaurants & Hotels –5.9 Net Taxes 0.4 with around 55 percent of Jordanian workers lacking –10 –5 0 5 10 15 social security coverage.28 Meanwhile, labor force participation remained stagnated at around 34 Source: DoS and World Bank staff calculations. 26 Jordan’s main COVID-19 restriction policies remained tourism activities.26 Other contact-intensive services, in place until Q1-2022. In March, Jordanian government such as transport and personal services, also eased restrictions including reducing the quarantine remained below the pre-pandemic level. In contrast, period for people who test positive for COVID-19 to five the mining & quarrying sub-sector over-performed days, removing the requirement for visitors to take a compared to the pre-pandemic level, in part as a PCR test before or upon arriving in Jordan, and allowing result of higher demand for commodities driven by full capacity opening of public facilities including restaurants. the global recovery. Interestingly, exports of phos- 27 In 2021, exports of phosphates and potash reached phates and potash reached their highest levels since US$1,256 million, an increase of 28 percent compared 2012.27 Thus, the biggest concern still remains that to US$980 million in 2019. even though GDP is showing some sign of recovery, 28 Labor Force Survey 2018. 2 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION COVID-19 PANDEMIC IMPACT ON JORDANIAN FIRMS: EVIDENCE FROM THE 4TH FOLLOW-UP BOX 2.  ENTERPRISE SURVEY The World Bank Group has completed the fourth round of Enterprise Survey (ES) follow-ups to track the impact of COVID-19 on Jordan’s private sector. Two years have passed since the outbreak of the COVID-19 pandemic. To assess the impact of the COVID shock on Jordan businesses, four rounds of follow-up surveys were undertaken to track a sample of firms that participated in the 2019 standard Enterprise Survey.a This data provides a unique opportunity to assess how firms were affected, what their response was, and how government support measures mitigated the shocks. Jordan’s private sector is only showing limited signs of recovery. For the first time since the beginning of the pandemic, the share of firms which were “confirmed closed” is showing a decline, from a peak of 15 percent in round III (June-July 2021) to 12 percent in round IV (Figure B.1). Importantly, firms with outward orientation appeared more shielded from the pandemic shock. The level of integration into global supply chains served as a source of resilience for Jordanian businesses, as exporting firms were more likely to report an increase in sales (almost 7.9 percent of Jordanian firms derived at least 50 percent of their sales from direct exports). Similarly, fewer exporting firms reported cuts in their input supplies, raw materials, and other goods bought to sell, compared to non-exporting firms. Aiding the recovery, government support reached wider groups of firms by end-2021. In 2020, about one out of three firms reported to have received a form of national or local government assistance. By the latest round, the figure rose to nearly 40 percent. In addition to wage subsidies (received by 78 percent of firms), 22 percent of firms reported receiving cash transfers and access to new credit, followed by fiscal relief (16 percent of firms), and deferral of payments option (10 percent). Nonetheless, expectations of a full recovery remain quite pessimistic. At the start of the pandemic, firms estimated that it would take an average of 8 months to return to normal levels of operation. This increased to 10 months in winter of 2020, and 11 months in both spring 2021 and fall 2021. Furthermore, close to 45 percent of firms in round IV responded that they expected to fall in arrears of outstanding liabilities in the next 6 months. Even though more firms turned to online business activity during the pandemic, this did not lead to increased sales. Jordanian businesses steadily increased efforts to adapt to the post-pandemic business operations. The share of firms that started or increased online business activity grew from 57 percent during the first round to 66 percent during the latest round–one of the highest among all surveyed countries. Consistent across all survey rounds, this figure was notably higher for firms whose top managers were female. However, these efforts did not increase sales. The majority of firms (83 percent) did not report online sales generation even by November 2021. Thus, the boosted online activities appeared to have targeted marketing and meeting the immediate customer needs, rather than kickstarting a systematic digital transformation of firms. Small firms are rebounding better but large firms continue to struggle. Intriguingly, small firms no longer reported the highest business closures nor the largest drop in sales (Figure B.2). At the same time, the decline in monthly sales for large firms became even more pronounced compared to the previous round. Despite some preliminary signs of recovery, firms across sizes and sectors registered an accelerated decline in their full-time workforce, potentially indicating some economic scarring. Small (size) and services (sector) firms experienced the most severe setback with their permanent workforce shrinking by nearly 40 percent since December 2019 (or compared to pre-pandemic levels) (Figure B.3). This seemed to reflect the nature of the pandemic shock which has negatively affect the contact intensive sectors (such as services) more intensely. Moreover, the services sector dominates the Jordanian economy’s sectoral composition and tends to have smaller establishments (CPSD 2021). For instance, the majority of Jordan’s start-ups worked in the services sector with a particularly large concentration in the retail trade. These firms appeared to have a higher incidence of job shedding as the decline in employment has been mainly driven by retail, other services, and food subsectors. This phenomenon may also explain the protracted recovery of the labor market as small firms made up about 96 percent of total Jordanian enterprises and employed 60 percent of the country’s labor force, according to the Jordanian Small and Medium Enterprise Association (CPSD 2021). The pandemic seems to have exacerbated already-weak labor market conditions. Key labor market challenges before the COVID-19 crisis included a lack of labor market dynamism, rising informality, and limited net job creation. Such obstacles did not provide enough high- quality jobs and the available jobs were concentrated in lower-productivity sectors (CPSD 2021). Although the private sector in other countries in the region faced similar challenges, Jordan was one of few countries whose surveyed firms exhibited a negative employment growth in the last two rounds of the ES even prior to the pandemic shock (2013 and 2019) (Figure B.4). Overall, long-term trends in private sector performance and the business environment suggest that Jordan’s private sector is facing a growing gap with regional and global comparators, which has been exacerbated by the pandemic. Firm-level metrics captured by the 2013 and the 2019 ES revealed that the competitiveness of Jordan’s private sector largely declined. Jordan’s private sector seemed not to fully utilize the existing production capacity and invested far less than its peers. For instance, firms reported that their average capacity utilization declined from 66 percent in 2013 to 59 percent in 2019. This was 8 percentage points lower than the MENA average and 13 points lower than upper middle-income countries. This unmet potential was more acute in SMEs, which faired much worse on these metrics than larger (continued on next page) Economic Update 3 COVID-19 PANDEMIC IMPACT ON JORDANIAN FIRMS: EVIDENCE FROM THE 4TH FOLLOW-UP BOX 2.  ENTERPRISE SURVEY (continued) entities. These trends took place in the context of a rapidly evolving business environment, due to external shocks and policy changes that have likely been exacerbated by the COVID-19 pandemic. FIGURE B.1 • Share of Firms Permanently Closed FIGURE B.2 • Average Change in Monthly Sales (Percentage Point Change Since Compared to One Year Ago December 2019) (Percent) 40 38.2 All firms –25 28.4 Small firms –28.8 20 17.8 Size 14.6 Medium firms –14.2 11.9 11.3 11.8 5.1 Large firms –39 0 Manufacturing 1–2.5 Sector Round I Round II Round III Round IV Confirmed permamently closed Services –30.9 Confirmed or assumed permamently closed 0 –10 –20 –30 –40 –50 Source: Enterprise Surveys, The World Bank, http://www.enterprisesurveys.org — Source: Enterprise Surveys, The World Bank, http://www.enterprisesurveys.org — Jordan COVID19 Follow up surveys Round 4 (Dec 2021) and WB staff calculations. Jordan COVID19 Follow up surveys Round 4 (Dec 2021) and WB staff calculations. FIGURE B.3 • Change in Permanent Full-Time FIGURE B.4 • Job Creation in the Private Sector Workforce (Annual employment growth in (Percentage point change since percent) December 2019) 8 0 6 –5 4 –10 –10.7 –15 –14.4 2 –20 0 –21.4 –25 –2 –30 –29.0 –4 –35 –37.0 –37.7 –6 –40 Lebanon, 2019 West Bank and Gaza, 2019 Jordan, 2019 Malta, 2019 Egypt, 2020 Tunisia, 2020 Morocco, 2019 MENA, 2019 Lower-middle- income Upper-middle- income Aug '20 Jan '21 Jul '21 Dec '2021 Large Manufacturing Medium All Services Small Source: Enterprise Surveys, Jobs Undone: Reshaping the Role of Governments toward Source: Enterprise Surveys, Jobs Undone: Reshaping the Role of Governments toward Markets and Workers in MENA (forthcoming) and WB staff calculations. Markets and Workers in MENA (forthcoming) and WB staff calculations. a 601 firms participated in the standard ES interview in 2019. The same firms were contacted for the four rounds of ES on the impact of the COVID-19 pandemic in 1) July/ August 2020, 2) November 2020/January 2021, 3) June/July 2021, and 4) December 2021. 4 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION FIGURE 4 • Unemployment Rate While women with higher education (bachelor (Percent) or above), continue to show a higher labor participa- 55 COVID-19 Outbreak tion rate than women with less education, this is also 50 45 the group of women with the highest share of unem- 40 ployment. During 2021, women with higher education 35 30 made up nearly 80 percent of all unemployed women. 25 20 Moreover, women with higher levels of education dem- 15 onstrate considerably higher unemployment rates 10 compared to men with the same level of education at Q1-2018 Q2-2018 Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 36 percent, compared to 23 percent for men during Q4-2021. Moreover, employment opportunities for Total Female Youth (15–24 years) women are highly concentrated in the public sector, Source: DoS and World Bank staff calculations. which employs most female workers and provides more flexibility and higher benefits. However, as fiscal constraints limit growth of public sector jobs, adding percent throughout 2021, largely unchanged from to women’s difficulty in finding employment.30 In the previous two years. particular, college graduates continue to have trouble A striking gender divide continues to char- finding jobs with a significant mismatch of skills acterize the labor market. The female labor force with demanded by the private sector. Job seekers’ participation (FLFP) rate of 13.6 percent in Q4-2021 preference for public sector jobs are adding to the was almost 40 percentage points lower than that skill mismatch, as this distorts decisions on what skills of the male labor force participation and ranked to acquire, which are not necessarily relevant to the among the lowest FLFP rates in the world. Moreover, private sector. unemployment is a challenge for women in the labor Protracted labor market recovery may be market, leading to very few women working. In the linked to limited recovery of the services sector. last quarter of 2021, the female unemployment For example, more than 80 percent of Jordanian rate of almost 31 percent was over 9 percentage employees worked in the services sector while this points higher than that of the male unemployment was only around 50 percent in comparable econo- rate. Several factors inhibit women’s economic mies.31 At the same time, the services sector has opportunities, ranging from a legal framework that does not grant women and men the same rights, and 29 World Bank. 2022. Women, Business and the Law 2022. restrictive social norms related to women working, to Washington, DC: World Bank. The index measures more specific constraints such as lack of affordable, legislations that affect women’s economic participation quality childcare and reliable, safe public transporta- in eight areas: Mobility, Workplace, Pay, Marriage, tion, Jordan’s score of 46.9 out of 100 in the 2022 Parenthood, Entrepreneurship, Assets and Pension, Women, Business and the Law Index placed the and presents an index 0–100, where 100 reflects no discriminations. country amongst the bottom performers.29 Moreover, 30 Lugo,Maria Ana; Muller,Miriam; Wai-Poi,Matthew Grant. women’s financial inclusion lag that of men, which Middle East and North Africa – Women’s Economic impacts their entrepreneurship opportunities, and Participation in Iraq, Jordan, and Lebanon (English). there is a lack of gender diversity in the private sector Washington, D.C.: World Bank Group. See also: Kasoolu, at all levels. A mere 3 percent of enterprises are led S., et al., 2019. Female Labor in Jordan: A Systematic by a female top manager, there is a general lack of Approach to the Exclusion Puzzle. Harvard CID Working Paper; World Bank. 2020. State of the Mashreq Women. family-friendly policies and practices and there are Washington, D.C.: World Bank Group; and World Bank. lower wages in the private sector as compared to 2016. Jordan Job diagnostics. Washington, D.C.: World the public sector, making employment in the private Bank Group. sector less attractive for women. 31 Ibid. Economic Update 5 been most affected by the pandemic. For instance, Overall Central Government Fiscal FIGURE 5 •  the employment rate in services declined from 22.4 Deficit (Percent of GDP) percent in Q4-2019 to 20.6 percent by Q4-2020 and has remained broadly stagnant since then. In addition, 8 7.3 findings from the latest round of the Enterprise Survey 6 4.7 5.7 4.9 (December 2021) reveal a sustained job shedding by 4 2.9 3.3 the sector (Box 2). 2.2 2 Boosting dynamism in the private sector is key to job creation. Notably, during Q4-2021, private 0 sector jobs made up over 47 percent of all employment –2 2015 2016 2017 2018 2019 2020 2021 in Jordan compared to 44 percent before the pan- demic. Although this is a positive development, much Overall deficit, incl. grants Primary deficit, incl. grants more needs to be done given the mammoth challenge at hand. The economy remains dominated by small Source: MoF and World Bank staff calculations. and low productivity firms, leading to fewer and lower quality jobs being created even prior to the pandemic. of GDP lower than 2020 and 0.4 percent below the The low productivity structure also fuels informality, and budget target for 2021. Nonetheless, the deficit (incl. it is the informal workers who have been most affected grants) remains above the pre-crisis level averaging at by the pandemic through layoffs and wage cuts. 3.6 percent of GDP during the past 5 years preceding Government has recently undertaken the pandemic (Figure 5). several broad-base structural reforms to boost Domestic revenue collection showed employment. These reforms included attempting to robust growth during 2021, supporting the address the gender-biased articles in the labor law overall consolidation effort. Domestic revenues and expanding social security coverage of workers reached almost 23 percent of GDP in 2021 compared by lowering social security contributions for certain to around 20 percent of GDP in 2020 on the back of population groups and allowing for partial coverage strong growth in both tax and non-tax revenue col- of long-term benefits. During the pandemic, the lection. Direct tax collection (taxes on income and government also provided firms with wage subsidies profits and financial transactions) remained strong, to help retain formal workers and minimize layoffs.32 growing by 8.7 percent to reach 3.9 percent of GDP Moreover, the GOJ recently pledged 80 million in 2021 compared to 3.7 percent of GDP in 2020. Jordanian dinars to the Tashgheel national employ- This turnaround is a result of the government’s ment program with the aim to provide 60,000 formal continued effort to curb tax evasion and improve private sector jobs and support relevant skills training and acquisition. However, additional actions are needed both from the government and private sector 32 The Jordanian government reduced social security side to support a more inclusive private sector that contributions in the agricultural and IT sectors and have benefits from the country’s full potential in terms of announced its commitment to extending the reduced human resources and is able to generate more and rates for new workers under the age of 30 for a period better jobs (see Special Focus Section: Creating of 10 years in all sectors. However, with lower social more and better Jobs in Jordan). security contributions, workers receive less benefits. Source: International Monetary Fund. 2021. Third Review under the Extended Arrangement under the Fiscal and Debt Developments Extended Fund Facility and Request for Modification of Performance Criteria—Press Release. Washington, D.C.: International Monetary Fund. Jordan made notable progress towards fiscal 33 Based on the IMF GFS classification, including grants consolidation during 2021. The CG fiscal deficit and use of cash. Use of cash in 2021 is estimated at 0.3 (incl. grants) reached 5.7 percent of GDP,33 1.6 percent percent of GDP in the IMF country report No. 22/4. 6 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION FIGURE 6 • Breakdown of Total Revenues primary contributors to keeping recurrent spending (Share of Total Revenues in 2021) high were interest payments, military expenditures, and compensation of employees. On the other Taxes on foreign hand, a decline in transfers partially offset the trade, 4% overall increase in recurrent spending. A positive General sales tax, development this year has been higher capital 50% spending, which reached 3.5 percent of GDP, albeit 0.5 percent of GDP below the budgeted target, but Non tax revenues, still the highest level since 2017. This is a welcome 21% Taxes on development given the critical role of public invest- income & ment in reviving economic activity.39 profits, Grants, 15% 10% Solid economic turnaround and consolida- Taxes on financial transactions, 1% tion effort have helped slow the accumulation of debt. At end-2021, Jordan’s government and guaran- Source: MoF and World Bank staff calculations. teed gross debt stood at almost 113.8 percent of GDP, 4.8 percentage points above the 2020 level. At the same time, government and guaranteed gross debt net tax compliance. On the other hand, indirect taxes of SSIF debt holdings grew by 4.0 percentage points to (general sales tax and taxes on foreign trade)—with reach 90.7 percent of GDP during the same time. more than 50 percent weight in total revenues—grew However, the structure of government by almost 15 percent to reach 13.6 percent of GDP and guaranteed debt remains largely favor- (compared to 12.3 percent of GDP in 2020), benefit- able. Jordan continues to benefit from a relatively ting from exceptionally high import growth, demand favorable debt structure due to its large share of recovery and pickup in revenues from oil deriva- tives.34 Non-tax revenues also registered a robust increase of more than 30 percent, reaching 5.3 34 In 2019, non-tax revenues on oil derivatives were percent of GDP or slightly below the budget target reclassified as sales taxes. They are estimated to of 5.9 percent of GDP. While most of this growth constitute around a quarter of sales tax revenues. reflects a rebound from a pandemic-induced trough, 35 According to the Department of Land and Survey, real it also appeared to be propelled by high real estate estate trade volume in 2021 increased by 8 percent activity due to exemptions on land registration fees compared to 2019. 36 Jordan received US$2.4 billion in foreign aid from and property sales taxes, which were extended until the U.S. in 2020, of which 79 percent was economic end-March 2022.35 Moreover, steady grant inflow has assistance (Source: https://foreignassistance.gov) continued to buoy fiscal revenues, amounting to 10 37 In March 2021, the government announced a fiscal- percent of total revenues in 2021 or 2.5 percent of stimulus package, including an expansion of the social GDP (Figure 6). Historically, Jordan has benefitted safety net, employment programs, support to the tourism from significant foreign grants, being the third largest sector, and clearance of arrears. 38 During 2018–21, 75 percent of current expenditures recipient of U.S. foreign aid in 2020.36 consisted of compensation of employees, interest Meanwhile, pandemic-related spending payments, defense and security, as well as pensions. pressures and higher capital spending kept the 39 Capital multipliers are estimated to be larger than current government’s total spending elevated. At end multipliers. For instance, Cerisola et al. (2015) find that 2021, the Central Government’s total spending for the average MENAP country, the estimated fiscal reached 31 percent of GDP, slightly above the 2020 multipliers range from 0.2 to 0.7 for current spending, and 0.6 to 1.4 for government investment spending level, reflecting continuation of fiscal stimulus37 (Cerisola et al., 2015. “Assessing the Impact of Fiscal and spending rigidities.38 Recurrent expenditures Shocks on Output in MENAP Countries”, IMF Technical remained more or less at the same level as last Notes and Manuals No.2015/01, International Monetary year, at around 27 percent of GDP. Within this, the Fund.). Economic Update 7 FIGURE 7 • External Public Debt by Lender in FIGURE 8 • Public Debt Service (budget and 2017-2021 Guaranteed) (Percent of GDP) (Percent of GDP) 50 12 9.1 9.5 10 8.8 40 8 6.1 6.5 30 6 4 20 2 10 0 2017 2018 2019 2020 2021 0 2017 2018 2019 2020 2021 Repayment of Foreign Debt Interest Payments Public debt service Bilateral loans Multilateral loans Local bonds in US$ Other Eurobonds Source: MoF and World Bank staff calculations. Note: Public debt service includes interest payments debt (on budget and guaranteed Source: MoF and World Bank staff calculations. debt) and repayment of foreign debt (budget and guaranteed debt). concessional debt. At end-2021, almost 41 percent Balance of Payments Position of Jordan’s public debt was external and within this more than half was from multilateral and bilateral Global economic activity showed a strong rebound lenders (Figure 7). Moreover, Eurobonds and local in 2021, supported by robust consumer spending bonds in US dollars have gained significant impor- and trade. Although the recovery remained broadly tance over the last decade, amounting to around uneven, improved vaccine rollouts and lifting of 43 percent of external debt in 2021. Multilateral COVID-19 restrictions have helped increase consumer loans retained their domination in net borrowing confidence, particularly across major countries. This during 2021, making up almost three-quarters in turn supported global trade activity as merchandize of the total—most notably from the IMF and the trade volumes grew by 10.3 percent in 2021 after World Bank—while of the remaining, 14 percent contracting by 5.3 percent in 2020. However, a came from foreign banks and companies and 7 protracted recovery in services trade, especially at percent were US dollar denominated bonds. This ports, with increasing demand for goods led to global year, a major achievement for Jordan has been to supply chain shortages. This together with improved maintain, or in some cases to improve, its long-term global demand—due to the continuation of supportive foreign-currency credit rating across all major rating monetary and fiscal policies—caused global commodity agencies reflecting progress on fiscal consolidation prices to rise with an unprecedented rate of around and expectations on achieving debt stabilization, 15 percent in 2021 (the highest increase recorded despite the challenging external environment. since 2011). On balance, these developments have Public debt service in 2021 declined to caused significant deterioration in the current account 8.8 percent of GDP from 9.5 percent in 2020 balances, especially those of import-dependent (Figure 8). Interest payments on domestic and emerging economies, such as Jordan. foreign debt reached 3.1 percent of GDP and 1.4 Growth in imports substantially outpaced percent of GDP respectively, which is 0.3 and 0.1 strong recovery in exports. Specifically, Jordan’s percent of GDP higher than 2020, respectively. total import bill increased by almost 25 percent in 2021 Despite higher interest costs in 2021, repayments of as against 10 percent contraction in 2020. Sectoral foreign debt have been slightly lower compared to data shows that energy imports grew by 44 percent last year, leading to an overall decline in debt service last year. Interestingly, all this increase in energy in 2021. imports was due to higher energy prices—which rose 8 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION FIGURE 9 • Jordan’s Current Account Developments and their Drivers (Percent) a. Current account and its drivers b. Terms of trade and trade deficit c. Export growth as % of GDP 3-mma % growth in exports in 2021 20 18 125 15 Egypt 42.4 10 15 100 Albania 41.5 5 12 Turkey 33.0 0 75 Morocco 30.5 –5 –1.7 9 Pakistan 28.8 –10 –6.9 –5.7 50 Bangladesh 27.5 –15 –10.6 –8.8 6 Guatemala 22.7 –20 3 25 Jordan 17.8 –25 Lebanon 9.6 –30 0 0 2017 2018 2019 2020 2021 0 10 20 30 40 50 2000 2005 2010 2015 2019 2021 Trade balance Services Trade deficit (billion US$, left axis) Income Curr. transfers Terms of trade (2000=100, right axis) Sources: CBJ, DoS, IMF, World Bank staff estimates. by 60 percent, as import of energy volumes contracted growth, travel receipts still remained 55 percent below by a quarter. Non-energy imports, having a share their pre-pandemic level. Similarly, workers’ remit- of around 85 percent in total imports, increased by tances, which declined by 9 percent in 2020, grew by a almost 23 percent in 2021. For this category, however, marginal 1 percent during 2021. Provided that a large the volume effect dominated over the price effect as chunk of Jordanian remittances originates from the former grew by 12.7 percent compared to 5.2 percent neighboring oil exporting nations, the slower recovery growth in the unit prices. In addition to the import of in such flows broadly indicates gradual ease in travel vaccines, cars, machinery and electrical equipment, restrictions by these countries.41 and cereals were the main non-energy imports in Jordan’s current account deficit neverthe- 2021 (Figure 10.a.). Moreover, data indicates that, in less continued to widen during the pandemic line with underlying economic recovery and improving years. The current account deficit (CAD, incl. grants) domestic demand, import of intermediate goods reached US$4.0 billion or 8.8 percent of GDP in 2021 remained buoyant, growing by 40 percent in 2021. compared to US$2.5 billion or 5.7 percent of GDP in A similar trend was reflected in import of consumer 2020 (Figure 9.a.).42 Furthermore, while the increase in goods which increased by 16 percent. On the other hand, growth in import of capital goods remained 40 Data for tourist numbers indicated that 0.9 million expat modest (3.3 percent), despite pick up in the public Jordanians visited the country in 2021 as compared to investment (see Fiscal section for further details). 0.4 million in 2020. This is followed by 0.3 million Egyptian visitors in 2021 against almost 0.05 million in 2020. Unlike the merchandize trade deficit, the 41 In addition to the broader trend, country specific factors, other major current flows remained net positive, such as Doha Initiative 2020—which designed to provide partially offsetting the deficit in the current account. 10,000 jobs for Jordanians in Qatar, may have also In particular, both travel receipts and remittance flows contributed towards underlying recovery in remittances. indicated steady recovery from pandemic lows. Travel 42 It is most likely that the current account deficit in 2021 is receipts, for example, cumulatively grew by 96 percent overstated. This is supported by the temporary increase in the net positive errors and omissions observed in that in 2021 against a contraction of 76 percent in 2020. year, which represents around 4.6 percentage points Detailed data shows that, besides expat Jordanians, of GDP, having assumed that the projected adjustment tourists from regional Arab countries, especially Egypt, path of the current account suggests it would level off remained largely supportivet.40 Despite such strong around 4 percent of GDP in the medium term. Economic Update 9 Jordan’s Key Balance of Payment Flows and CBJ’s Foreign Reserves Adequacy in 2021 FIGURE 10 •  a. Key balance of payments flows b. Financial flows c. FX reserves adequacy Average 2019 level=100, indices, 3-mma % of GDP latest position 150 8 Gross reserves ST external debt in months of 125 % of gross reserves imports 6 100 Turkey 75 4 Egypt 50 Morocco 2 Jordan 25 Albania 0 0 100 75 50 25 0 0 2 4 6 8 2019 Feb-20 Apr-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Dec-21 2014 2015 2016 2017 2018 2019 2020 2021 Exports Non-energy imports Remittances Energy imports Non-debt creating flows Debt creating flows Travel receipts Sources: CBJ, DoS, IMF, World Bank staff estimates. Jordan’s CAD in 2020 was mainly driven by a decline by strong growth in exports. Jordan’s total exports in services related trade—particularly tourism—due grew by 17.8 percent in 2021 against a decline of 4.5 to intermittent lockdowns, the deterioration in 2021 percent in 2020. This recovery was largely supported can be explained by the underlying improvement in by exports of chemicals, potassium and phosphate, domestic demand amid an unprecedented increase which together explained around two-third of the in the global commodity prices. increase in the country’s total exports. Demand from The merchandize trade deficit during US, India and the neighboring GCC region together 2021 reported a deterioration. The external explains around two-thirds of the total increase in trade deficit for goods deteriorated by 34 percent to Jordanian exports in 2021. Moreover, disaggregated reach US$9.9 billion in 2021 as against an improve- data shows that the price effect slightly dominated in ment of 15 percent in 2020 (US$7.4 billion). This is driving overall growth in exports. Specifically, exports the highest increase in the country’s trade deficit volume grew by an average 8.3 percent while their unit since 2005 when the deficit swelled by 48 per- prices increased by 10.5 percent during this period. cent.43 Most of this increase in Jordan’s trade deficit Notwithstanding these positive trends, Jordan’s in 2021 can be explained by a gradual improvement export recovery from the pandemic continues to lag in domestic demand as COVID-related restrictions its regional peers (Figure 9.c.). gradually eased. However, substantial deteriora- Amid weak private capital flows, Jordan’s tion in Jordan’s terms-of-trade, particularly that of access to official flows to cover the widening food and fuel items, has also played an important CAD, continued to be impressive. Foreign direct part in widening the country’s trade deficit in 2021 investment (FDI) on net basis declined by almost 17 (Figure 9.b.). Indeed, estimates indicate that around percent in 2021 to 1.3 percent of GDP compared one-fourth of total deterioration in the country’s to 1.7 percent of GDP in 2020. A similar trend was trade deficit during 2021 was only due to unfavor- observed for portfolio flows. These trends perhaps able changes in global commodity prices (see Box 3). 43 As a proportion of GDP, in historical comparison, trade Some of the impacts of higher commodity deficit continues to trend almost 4 percentage points prices on the trade balance were partially offset lower than its average in the last ten years. 10 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION RECENT TERMS-OF-TRADE SHOCK AND JORDAN’S MERCHANDIZE TRADE BALANCE – BOX 3.  A COUNTERFACTUAL ANALYSIS The world economy is currently reeling through a significant commodity price shock. According to the IMF data, prices of major global commodities have more than doubled over the last two years. This momentum appeared to be much stronger in the case of energy prices, which are showing almost 5 times increase compared to their low in April 2020. Similarly, global food and metal prices are also marching north, albeit at relatively lower pace than energy prices. Earlier, this trend was attributable to global supply chain shortages, increases in transportation cost, and recovery in global demand from the pandemic. More recently, this attribution shifted to the war in Ukraine since both Ukraine and Russia are major food and energy suppliers. On balance, this unfolding price shock has so far disproportionately affected the external accounts of import-dependent emerging economies, such as Jordan. The latest available data indicated a deterioration of around 10 percent in Jordan’s overall terms-of-trade during 2021.a This unfavorable trend in trade prices led to substantial widening in country’s trade deficit, which rose to around 22 percent of GDP in 2021; showing almost 5 percentage point increase over 2020. Counterfactual estimates show that, had trade prices remained at their end-2020 levels, Jordan’s trade deficit would have been 25 percent lower than the actual level reported in 2021 (Figure B.5). This could be equivalent of saving around US$2.2 billion or around 18 percent of average CBJ’s gross foreign reserves position in the last year. Interestingly, disaggregated analysis shows that, although the net impact of recent changes in terms-of-trade remained unfavorable for Jordan, it also benefited some products (Figure B.6). For instance, acceleration in global fertilizer prices and textile products translated into net benefit as they partially offset the impact of price hike in major imports. Overall, as expected, it is the unfavorable movement in global food and fuel prices which made a larger dent to Jordan’s widening trade gap during 2021. Besides this, these underlying developments would certainly have implications for domestic inflation outlook in near-term. FIGURE B.3 • Trade Deficit and Terms-of-Trade FIGURE B.4 • Sectoral Impact of Terms-of-Trade (US$ billion, 12-mma) (US$ million, during 2021) 10 10 600 9 9 400 Net benefit 8 8 200 7 7 0 6 6 –200 Net loss 5 -ve ToT impact on Jordan's trade deficit 5 –400 4 4 –600 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Food & Live Animals Beverages & Tobacco Crude Materials Mineral Fuels Animal & Veg. Oils Chemicals Manuf. Goods Mach. & Transport Actual ToT adjusted_Dec-20* Misc. Manuf. * Trade prices fixed at Dec 2020 level for both exports and imports Source: CBJ, DoS, IMF, WB staff estimates. Source: CBJ, DoS, IMF, WB staff estimates. Note: Disaggregate analysis excludes those commodities that are not classified Note: Disaggregate analysis excludes those commodities that are not classified elsewhere. They were around 10 and 1 percent of total imports and exports in 2021, elsewhere. They were around 10 and 1 percent of total imports and exports in 2021, respectively. respectively. a When calculated for only commodity trade, i.e., after excluding the impact of manufactured and industrial items, the deterioration in terms-of-trade was very substantial (at around 22 percent) in 2021. broadly reflect the continued uncertainty on part of have further raised concerns for emerging markets’ foreign investors towards the emerging markets since outlook that restrained investors during 2021. This the pandemic emerged. In addition, tightening global led to increased support in terms of official flows to financial conditions and elevated borrowing costs support external stability (Figure 10.b.). Specifically, Economic Update 11 government net official loans rose by almost 26 introduced measures to gradually reduce their COVID- percent to US$1.2 billion in 2021 compared to related monetary stimulus. So far, amid higher levels of US$0.9 billion in 2020. This was further supported by uncertainty, these developments have disproportionate IMF-EFF disbursements of around US$542 million on effects on emerging economies through increased net basis and SDR augmentation of US$469 million external outflows and weakened currencies.46 during the year. In addition to official flows, significant Jordan’s economy also faced an increase retrenchment of banks’ net foreign assets, driven by in price pressures, largely due to supply-side an approximate US$1.2 billion rise in non-resident disruptions. Specifically, being an import-dependent deposits, also helped improve the domestic forex small open economy, changes in Jordan’s term-of- liquidity of the banking system. trade, especially for energy and food items, remained Overall, developments in balance of pay- unfavorable for domestic prices throughout last year. ments remained net positive for the CBJ official Furthermore, trends in global transportation costs gross foreign reserves adequacy. As of end were also not supportive.47 Reflecting these develop- December 2021, the CBJ’s gross foreign reserves ments, headline CPI inflation clocked in at an average stood at US$19 billion; up by around US$2.1 billion 1.4 percent in 2021; the highest in the last 3 years from end December 2020 position. Supported by (Figure 11.a). This increasing trend in consumer strong commitments, this improvement remained prices continued during the first two months of 2022 substantially higher than earlier expectations, par- as headline inflation recorded at 2.2 percentage ticularly under the IMF-EFF program context.44 This in points over the same period last year. turn helped the authorities to meet the program’s net Inflation in Jordan remained low compared international reserves (NIR) targets by comfortable with other MENA countries. Specifically, as against margins.45 Importantly, standard reserves adequacy an inflation rate of 1.4 percent in Jordan, annual infla- measures broadly suggest that, at the end of 2021, tion in other regional countries averaged around 4 the CBJ foreign reserves remain at a comfortable percent during 2021 (Figure 11.b). To some extent, level even in comparison to most regional and peer lower inflation in Jordan is explained by slower countries during the pandemic stress (Figure 10.c.). pass-through of global commodity prices, especially This trend continued during the first two months of those of energy products, to consumer products. For this year as CBJ reserves position further strength- instance, against the rise in Brent crude prices by ened. Together with credible dinar peg and prudent around 50 percent, domestic fuel pump prices only macroeconomic management, adequate position of grew by 21 percent in 2021.48 Thus, slower pass- the CBJ’s foreign reserves provided much needed through helped contain a more severe impact from support to the country’s overall macro stability against potential external shocks. 44 For example, both 2nd and 3rd EFF reviews projected the CBJ’s gross foreign reserves to be around US$17 Monetary Policy and Inflation billion in 2021. 45 According to the IMF-EFF 3rd review, CBJ’s NIR stock increased from US$12.7 billion as of end December Global financial conditions have continued to 2019 to US$14.3 billion as of end September 2021. remain tight since the second half of 2021. In 46 On average, emerging markets’ currencies depreciated this period, commodity prices in global markets have by 11 percent over the last one year [Source: JP Morgan]. sharply risen due to supply-demand mismatches 47 Global container cost stood at $9,437 at end of 2021 that emerged during the pandemic. This led to an compared to $3,143 a year ago [Source: Bloomberg]. 48 Apparently, this diversion has further widened in the unprecedented increase in inflation across both first three months of 2022 as retail oil prices at pumps advanced and emerging economies which pushed showed a marginal increase of 1.4 percent since end their central banks to raise policy rates from pandemic 2021 compared to substantial increase in global oil lows. In addition, major central banks have recently prices in this period. 12 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION FIGURE 11 • Trends in Inflation, Money Supply and Banks’ Credit in Jordan a. Cumulative CPI inflation b. Average CPI in 2020 c. Banks’ credit Percent Index, Dec-2020 = 100 JD billion 5.0 110 % change in NEER 2021 0.4 M2 Money Supply 4.0 108 2.7 –4.3 Other Items (net) 3.0 106 Financial Institutions NDA 2.0 104 5.2 Private Sector 3.1 1.0 102 5.7 Public Sector Banks 0.0 100 NFA CBJ –1.0 98 2018 2019 2020 2021 2021 2021 2020 Mar-21 Jun-21 Sep-21 Dec-21 –1.2 –0.6 0.0 0.6 1.2 1.8 2.4 3.0 Jan-Feb Headline Core Morocco Egypt Jordan 2021 2020 Food Fuel & transportation S.Arabia Tunisia Iraq Sources: CBJ, Haver, IMF and World Bank staff estimates. the rise in global commodity prices. Furthermore, CBJ is gradually adjusting its monetary the Jordanian government has recently introduced stance to limit inflationary pressures amid nascent various targeted and time-bound price control mea- domestic recovery and heightened external pres- sures on imported food and vegetable items given sures. After no change over the past two years, CBJ the sharp increase in their prices in the global mar- has raised its key interest rates by 25 basis points kets due to the war in Ukraine.49 Even though price on March 22 and 50 basis points on May 8, 2022, controls are limiting the pass-through, thus helping which moved the main CBJ policy rate to 3.25 per- keep inflation at low levels, this is not a sustainable cent. These actions follow the reversal in the Federal way to address inflationary pressure over the mid- to Reserves’ policy stance and would help support dinar long-term. Price controls are (i) costly for government peg and sustain the strength and attractiveness of the finances (thus need to be temporary at best) as well JD-denominated assets against assets denominated as (ii) distortive of market signals (an impediment to in other currencies. In addition, it would also help private sector activity, thereby to employment). anchor gradually increasing inflationary pressures. Demand-side pressures broadly remained Moreover, given the recent trend in headline infla- subdued in driving consumer prices. Core infla- tion, the real interest rates have remained positive, tion—measured after excluding food and energy which will not only help anchor inflation expectations items—stood at 0.9 percent in 2021, indicating a but also help sustain economic recovery in the post marginal uptick from last year’s level of 0.6 percent. COVID period. In terms of contribution, core inflation only explained Money supply broadly remained buoyant around one-fifth of the overall increase in Jordan’s in 2021, notwithstanding some moderation in consumer prices during 2021. This points towards credit growth. Around 90 percent of the increase the fact that the economy is estimated to be still in money supply in 2021 was due to expansion operating below its potential as conditions in the labor the in banking system’s net domestic assets (NDA, market remained weak. Furthermore, detailed data indicates that services related prices have been major 49 For instance, government has recently capped the drivers behind core inflation. This highlights relatively general sales tax for vegetable oils at zero percent stronger recovery in Jordan’s tourism sector from the instead of earlier 4 per cent, until the end of May 2022 pandemic shock. [Source: Jordan News Agency, Petra]. Economic Update 13 even though credit to the private sector registered Bank kept the subsidized interest rates unchanged deceleration in growth from 5.9 percent in 2020 to for such refinance loans to support recent recovery.51 4.8 percent in 2021 (Figure 11.c). In contrast, credit Unlike NDA, the marginal increase in the banking sys- to the public sector accelerated and grew by almost tem’s net foreign assets (NFA) reflected the impact of 5.6 percent in 2021; indicating higher needs in the country’s higher trade deficit in 2021, largely due to absence of external credit. Overall, deceleration unfavorable changes in terms of trade amid declining in credit growth broadly explains CBJ’s calibrated export competitiveness. reversal in the monetary stance as underlying eco- Overall, the banking system remained sound nomic recovery takes hold (Box 4).50 This stance was and resilient. Licensed banks’ non-performing loans further cemented by recent increase in CBJ’s key to total loans stood at 5.0 percent in 2021. Meanwhile, interest rates. Notwithstanding this gradual policy banks’ capital adequacy remained strong at around adjustment, CBJ’s targeted support to the economy 18 percent and their dollarization ratio according to continued as it has extended its refinance program for 10 sectors to JD1.3 billion; the outstanding bal- 50 A similar trend could also be observed in the CBJ’s ance for refinancing program amounted to JD623 credit facilities to SMEs, where credit growth declined by million at the end of March 2022, providing space for 2 percent in 2021 over 2020. additional refinance exceeding JD600 million. The 51 For details, see monetary policy decision by the CBJ. BOX 4. CBJ’S MONETARY POLICY STANCE DURING THE PANDEMIC The monetary policy stance of the CBJ remained accommodative FIGURE B.7 • CBJ’s Monetary Policy Stance Index throughout the initial phase of the pandemic. This stance is characterized by the timely reduction in key interest rates (by 3.0 150 bps) along with a reduction in cash reserve requirement 1.5 (200 bps) and other targeted credit measures. On balance, these measures improved the licensed banks’ liquidity 0.0 position, which in turn supported credit growth towards both businesses and households during the downturn. Since the –1.5 beginning of 2021, the monetary policy stance of the CBJ has –3.0 broadly tightened compared to its average stance in 2020, as credit growth to private sector slowed from average 5.9 –4.5 percent in 2020 to 4.8 percent in 2021. Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 The restraint in monetary conditions could also be judged through constructed monetary policy stance index for the CBJ, Interest rate sub-index Credit sub-index using both interest rate-based (such as key interest rates) and Overall stance index non-interest-rate policy instruments (such as credit policies).a The index uses a statistical approach that aggregates the Source: CBJ and WB staff estimates. information contained in both interest rate based (interest rate sub-index) and non-interest rate instruments (credit sub-index). It could be observed from Figure B.7: CBJ’s Monetary Policy Stance Index that, led by the reduction in key rates and cash reserves requirements, the monetary conditions substantially eased during the first half of 2020. Subsequently, as the economy started to gradually recover from the shock, the monetary conditions begun to tighten. This trend became more prominent in 2021, largely reflected through declaration in credit growth. Recently, amid the surge in the Omicron variant, some respite appeared in the CBJ’s monetary stance at the beginning of 2022, which broadly remained neutral until the CBJ’s raised the interest rate in March and May 2022. a Two sub-indices are estimated using the principal component analysis, with the first one capturing changes in policy rates and cash reserves requirement that affect market interest rates (interest rate sub-index) and the other aiming to capture the credit growth (credit sub-index). The variables included in the calculation of the two sub-indices are: key short-term money market interest rates, lending rate for loans to private sector, change in reserve requirement ratio, and nominal effective exchange rate (for interest rate sub-index); and growth rates of M2 (excluding government deposits) and bank lending in JD to financial institutions and private sector. 14 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION liquidity definition decreased from 21.2 percent at the recent tightening in global and domestic financial con- end of 2018, to 19.3 percent at the end of February ditions call for more vigilance on the part of the CBJ 2022. Of note, comfortable foreign reserves position to preserve financial stability. This vigilance becomes over the last three years provided much needed especially important as the full impact of tapering off of support towards decreasing dollarization level in the COVID-related relief measures has yet to be reflected formal economy. Despite these positive developments, in banks’ balance sheets. Economic Update 15 2 OUTLOOK AND RISKS J ordan’s economic recovery is expected to recent tightening of global financial conditions due to remain broadly steady this year with slight hikes in policy rates in advanced economies, especially moderation due to heightened global risks. by major central banks, will have an impact on Jordan’s Growth is projected to reach 2.1 percent in 2022 on borrowing cost on international capital markets. top of 2.2 percent growth posted last year. Underlying Inflation is projected to moderately accel- recovery in domestic demand amid full reopening of erate this year, mainly due to supply-side factors the economy and resumption in travel and tourism are amid unfavorable outlooks for global food and expected to be the major growth drivers. Specifically, energy prices. Headline CPI inflation is projected to improved travel outlooks would help accelerate increase to 3.3 percent in 2022 compared to 1.4 per- recovery in the services sector, which has been hit cent last year. This sequential increase in consumer the hardest by the COVID-19 shock. Moreover, the prices mainly reflects a relatively higher expected government’s recent Economic Priorities Program for pass-through of elevated international oil and other 2021–23 is further expected to stimulate the economy commodity prices to domestic prices. However, the through direct support to priority sectors along with overall impact of current and expected changes in increased capital spending and employment programs global commodity prices to domestic prices is likely (see Annex 1: The government of Jordan’s Economic to be partially offset by the government’s recent fiscal Priorities Program for more detail). This outlook, and administrative measures to keep a check on however, is subject to notable downside risks, largely increase in retail consumer prices.52 Nonetheless, emanating from recent global developments. Most notably, supply chain bottlenecks emanating from 52 Price measures included (among others) a decrease in COVID-19 concerns in China as well as headwinds customs tariffs to 5 percent on most imports that are not from the war in Ukraine and the ensuing surge in global locally available, a price cap on vegetable oil, a ceiling commodity prices are likely to create sizable external on freight costs, reduction of GST on vegetable oil, and and domestic pressures on Jordan, similar to many an exemption of imported agricultural production inputs other import-dependent economies. Furthermore, the from service fees. 17 these price control measures are anticipated to expected to continue to support fiscal consolida- subside during the year. Although these measures tion efforts. Fiscal reforms under the ongoing IMF-EFF cast uncertainty on part of the future inflation outlook, program, especially in the areas of tax administration, a prudent monetary stance by the CBJ would help are expected help improve authorities’ tax collection arrest such risks through demand management. performance going forward. Revenue collection is On the external front, the current account likely to be further supported by the expected recovery deficit is expected to marginally decline. The CAD in domestic economic activity, especially in the services (incl. grants) is expected to reach 8.2 percent of GDP sector. Overall, total fiscal revenues and grants are in 2022 compared to 8.8 percent in 2021.53 This projected to reach around 25.8 of GDP in 2022 as moderation in CAD is mainly explained by improved compared to 25.3 percent in 2021. Amid evolving risks, outlook for travel receipts, which are expected to fiscal spending is likely to be restrained as COVID- reach levels close to those of 2018. This outlook is related spending pressures ease. At the same time, the further supported by the complete removal of travel government aims at providing targeted support through restrictions in Jordan and accelerated global vac- cination drive. Despite projected increases in travel receipts, however, recent unfolding uncertainty 53 4M-2022 data however is pointing towards some positive resulting from the war in Ukraine is likely to keep the development for the external sector. For instance, export CAD elevated for yet another year. The anticipated during Q1-2022 grew by 40 percent, although imports also registered a growth of 29 percent. However, travel slowdown in external demand in partner countries receipts reflected a strong rebound of almost 250 may also affect the export outlook. This together with percent. These early signs indicate that current account unfavorable import prices, particularly that of food deficit (as % of GDP) during 2022 may be slightly smaller and energy, are likely to keep Jordan’s merchandise than earlier projections. trade deficit on the higher side.54 On a positive note, 54 In response to the rise in global oil prices in early 2020, the favorable price outlook for fertilizers and chemi- the government was using its strategic reserve (about 2 months of supply) to reduce its oil imports. Price controls cals (being major export items for Jordan), would help for oil derivatives (gasoline and diesel) have been put arrest some of this widening. in place in the to mitigate the impact of inflation on the Elevated CAD is likely to keep Jordan’s population. However, these costs will likely be significant gross external financing needs higher. This can be once Jordan resumes its imports at full volumes and challenging given the increasing cost of borrowing in starts replenishing its strategic reserve. global debt markets and lower expectations of foreign 55 Despite this, Jordan has been successful in issuing U$650 million worth Eurobonds on international markets investment inflows towards emerging economies, on 30 June 2022, with a fixed coupon rate of 7.75 percent including Jordan.55 However, Jordan continues to over a 5 year maturity. The issue was oversubscribed by benefit from significant long-term and concessionary more than 6.25 times. support from multilateral and bilateral partners56 which 56 Average time to maturity for bilateral and multilateral debt reached 5.4 percent of GDP in 2021 (compared to contracted in 2020 and the first half of 2021 remained past three years average of 3.9 percent of GDP).57 relatively long at 10.1 and 8.3 years, respectively (source: WB staff calculations). Hence, most of this required external financing is 57 Based on MoF government finance bulletin (January expected to be met through official multilateral and 2022), total disbursements from multilateral and bilateral bilateral financing. In this context, successful achieve- lenders reached 5.4 percent of GDP in 2022, while ment of the IMF program targets along with timely foreign grants stood at 2.5 percent of GDP. Additionally, implementation of Jordan’s economic reform agenda according to data from the World Bank’s International remains crucial. This is also important from the per- Debt Statistics, loan support to Jordan from official creditors is relatively high in regional comparison. In spective of maintaining credible dinar peg supported 2020, disbursements from official creditors (multilateral by adequate CBJ’s foreign reserves position. and bilateral loans, excluding IMF) reached 3.4 percent On the fiscal side, fiscal reforms, robust of GDP in Jordan, compared to 4.4, 2.4 and 1.3 percent revenues performance, and economic recovery are of GDP in Morocco, Tunisia and Egypt, respectively. 18 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION higher capital spending to priority sectors. As a result, management of its strategic grain reserves as the capital spending during 2022 is projected to reach 3.7 primary means to mitigate shortages or price fluctua- percent of GDP in 2022—a level not reached since 2015. tions. Additionally, if the war becomes protracted, it However, recent administrative price control measures could further erode global confidence, increase are likely to increase fiscal pressures in the near-term financing costs for emerging and developing markets, and could affect the outlook for capital spending.58 As and worsen energy and food insecurity. This together a result, the CG fiscal deficit (incl. grants) during 2022 with sustained global supply chain disruptions could is projected to reach 4.1 percent of GDP, or almost 1.7 further increase inflationary pressures and may lead percentage points lower compared to 2021 level. This to faster than anticipated global monetary policy would help achieve an almost balanced primary bal- tightening and cause a marked slowdown in global ance in 2022 compared to 1.3 percent deficit in 2021. growth. Already, recently released IMF WEO is These developments are critical for stabi- pointing towards these global trends.60 Certainly, this lizing the country’s elevated debt-to-GDP ratios. outlook poses substantial economic challenges for Jordan’s gross government and guaranteed debt is the Jordanian economy amid the country’s already projected to peak at 114.8 percent of GDP in 2023 significant unemployment challenge. before gradually declining thereafter.59 In contrast, Over the medium-term, growth is projected gross government and guaranteed debt—net of SSIF to increase to only 2.3 percent a year unless holdings—will already begin declining in 2022 to structural reforms are implemented at a faster reach 89.9 percent of GDP. Nonetheless, risks to debt pace. Medium-term growth prospects remain con- sustainability remain high and include lower-than- strained by long standing structural impediments in anticipated growth, slippages in fiscal consolidation, the Jordanian economy Downside risks include a or materialization of large contingent liabilities of prolongation of the Ukraine-Russia war, continued state-owned companies. Moreover, in the medium spread of COVID-19 and the emergence of new, term, rising interest rates could raise Jordan’s debt more contagious virus strains, persistent inflationary servicing costs. pressures and global supply chain disruptions as well On balance, due to recent external devel- as risks stemming from climate change and natural opments, uncertainty and risks surrounding hazards. Jordan’s near-term economic outlook are excep- tionally high. Although Jordan’s direct trade links with both Ukraine and Russia are limited, negative spillovers from other channels can be significant. 58 Expenses for securing food and feed to reduce short The war has caused a major shock to global com- term vulnerability to supply shocks are estimated at modity markets and poses a major threat to global US$460 million over 2022–23 (source: World Bank’s food security as Ukraine and Russia are major global Emergency Food Security Project for Jordan). producers of basic agricultural commodities (wheat, 59 Under the baseline scenario of the World Bank’s recent maize, oilseeds), fertilizer and fuel. These dynamics debt sustainability analysis. also affect Jordan’s capacity to continue grain imports 60 According to the IMF WEO (April 2022), global growth has been downward revised by 0.8 percentage points to meet its food security needs as small buyers, like in 2002, while growth for Advanced Economies Jordan, are competing in a tight market with larger and Emerging Market and Developing Economies buyers and fewer suppliers. These impediments and is projected 0.6 and 1.0 percentage points lower, global risk factors could limit the government’s timely respectively. Outlook and Risks 19 TABLE 1 • Jordan – Selected Economic Indicators (2018–2023) 2018 2019 2020 2021 2022 2023 Act. Act. Act. Act. Proj. Proj. Real sector (in percent, unless otherwise specified) Real GDP growth 1.9 2.0 –1.6 2.2 2.1 2.3 Nominal GDP (JD Billion) 30,482 31,597 31,025 32,123 33,858 35,483 CPI Inflation (p.a.) 4.5 0.8 0.3 1.4 3.3 2.5 Government finance (in percent of GDP, unless otherwise specified) Total revenues and grants 25.7 24.3 22.7 25.3 25.8 24.7 Domestic Revenue 22.8 21.8 20.1 22.8 23.1 23.1 Tax revenues 15.5 15.3 16.0 17.5 17.5 17.5 Non-tax revenues 7.3 6.5 4.1 5.3 5.6 5.6 Foreign Grants 2.9 2.5 2.5 2.5 2.7 1.6 Total expenditure (incl. use of cash) a 29.3 29.2 30.0 31.0 29.9 29.5 Current 25.0 25.0 27.2 27.1 26.2 26.1 Capital Expenditure 3.1 3.1 2.7 3.1 3.7 3.4 Statistical discrepancyf 0.3 0.0 0.0 0.0 0.0 0.0 Unallocated discretionary fiscal measures (cumulative) b 0.0 0.0 0.0 0.0 0.0 1.3 CG Overall balance (deficit (-), incl. grants) –3.3 –4.9 –7.3 –5.7 –4.1 –3.5 CG Primary Balance (deficit (-), incl. grants) 0.0 –1.3 –3.1 –1.3 –0.1 0.4 (in percent of GDP, unless otherwise specified) Government and guaranteed gross debtc 92.9 97.4 109.0 113.8 114.5 114.8 Government and guaranteed gross debt, net of SSIF holdingsc 75.1 78.0 88.0 92.0 91.1 89.9 SSIF holdings of government debt d 17.8 19.4 21.1 21.8 23.4 24.8 External sector ( in percent of GDP, unless otherwise specified) Current Account (including grants) –6.9 –1.7 –5.7 –8.8 –8.2 –6.7 Memorandum Items: NEPCO operating balance (JD million)e –79 2 –62 –158 –427 –466 WAJ overall balance, excl. project grants (JD million) f –279 –291 –257 –304 –304 –306 Export FOB (% growth) 3.2 7.3 –4.5 17.8 4.8 5.1 Import FOB (% growth) –0.8 –5.5 –10.1 25.4 89.5 3.1 Travel Receipts (% growth) 13.2 10.2 –75.7 95.8 74.0 16.2 Remittances (% growth) –1.1 0.9 –9.1 1.0 1.4 2.5 Gross usable Foreign Currency Reserves (US$ million) 12,512 13,511 15,127 17,272 17,395 15,720 in months of next year’s imports of GNFS 6.8 8.8 7.8 8.0 7.7 6.8 Source: World Bank staff projections (JEM Spring 2022). a Includes use of cash based on IMF 3rd EFF review, Country Report No. 22/4, Jan 2022. b Unidentified cumulative fiscal discretionary measures part of IMF 3rd EFF review, Country Report No. 22/4, Jan 2022. c Government’s direct and guaranteed debt (including NEPCO and WAJ debt) and securitization in 2019 and 2020 as per IMF 3rd EFF review, Country Report No. 22/4, Jan 2022. d 4 Projected SSIF holdings of public debt as estimated in IMF 3rd EFF review, Country Report No. 22/4, Jan 2022. e Based on WB energy team projections. f Based on IMF 3rd EFF review, Country Report No. 22/4, Jan 2022. 20 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION 3 SPECIAL FOCUS Creating more and better Jobs in mainly driven by one of the lowest female labor force Jordan participation rates in the world (14 percent). These figures reflect in part the impact of the COVID-19 pan- Jordan’s labor market is characterized by high levels demic, and the labor market is yet to recover despite of unemployment and informality, which are largely the the economic rebound starting in 2021. But the level result of the limited capacity of the private sector to of joblessness in Jordan has been persistently high generate more and better jobs. Higher job creation is throughout the 2000s (Figure 12): only about 3 in 10 generally held back by an economic structure that is Jordanians of working age are employed (2 in the dominated by small, low-productivity firms—the result private sector and 1 in the public sector). Also, more of inefficient firm dynamics. Thus, creating more and than half of Jordanians working in the private sector better jobs in Jordan requires, first and foremost, reforms are informal (72 percent including non-Jordanians)— to increase market contestability by reducing state- meaning they are not covered by social security and induced distortions. This needs to be accompanied at increased vulnerability and risks to workers. This by efforts to upskill the workforce, labor policies that figure that has not changed much since 2010. facilitate job creation while protecting workers, as well High levels of unemployment and infor- as specific measures to create opportunities and lift mality are mainly explained by the limited capacity constraints to female employment. of the private sector to generate more and better Jordan’s labor market is characterized jobs. Net job creation is very low and well below the by persistently high levels of joblessness and flow of new entrants (Figure 13). Only two-thirds of net informality. The latest figures (Q4-2021) depict a jobs created come from the private sector, a share dire situation: 23 percent of Jordanians in the labor that has not changed since 2007. The remarkable force are unemployed, mostly affecting youth (52 increase in the flow of new entrants into the labor percent) and women (31 percent). Only 34 percent of market until 2013 comes from both Jordanians Jordanians over the age of 15 are in the labor force, (increasingly educated) and non-Jordanians (mostly 21 FIGURE 12 • Joblessness Has Been Persistently Low Since 2000, Particularly among Women Women Men 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Employed Unemployed Inactive Source: DoS and World Bank staff calculations. FIGURE 13 • Low Net Job Creation, Well Below prosperity. It is keeping unemployment high and Flow of New Entrants private sector wages stagnant, as lower productivity (Net Number of Jobs Created) makes it difficult for firms to pay higher wages. It is 300,000 also decreasing the employment shares and relative 250,000 wages of high-educated workers (including most 200,000 Jordanians joining the labor force) relative to low- 150,000 educated workers (Winkler and Gonzalez, 2019). And 100,000 it is fueling job informality, as low productivity jobs 50,000 tend to be informal. The low activity rates, particularly 0 among women, are constraining economic growth, 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 and together with high job informality, are limiting Net jobs created (total) the capacity of the labor market to reduce poverty.63 Change in working age population All of this is resulting in growing dissatisfaction, par- Net jobs created (private) ticularly among an increasingly educated youth, most Source: DoS and World Bank staff calculations. of whom either find themselves working informally, unemployed, or inactive.64 low-educated).61 Not only is the private sector not creating enough jobs, but the jobs that were created between 61 The size of the working age population in Jordan has 2000 and 2015 tended to be in lower productivity, lower doubled since 2000. Only nine other countries in the world had a higher rate of working age population skill economic activity62 sectors like wholesale and retail growth during this period. trade, restaurants & hotels and manufacturing, which 62 Hernan Winkler and Alvaro Gonzalez. 2019. Jobs have lower productivity levels. And these lower produc- Diagnostic: Jordan, Jobs Series Issue No. 18, World tivity sectors have seen their productivity levels decline or Bank Group. remain stagnant, driving down overall productivity growth 63 Lugo, Maria Ana; Muller, Miriam; Wai-Poi, Matthew since 2008. Higher productivity sectors, like transport, Grant. 2020. Middle East and North Africa – Women’s Economic Participation in Iraq, Jordan, and Lebanon. storage and communications, have seen their employ- Washington, D.C.: World Bank Group. ment share decline (Figure 14) since 2000. 64 About 41 percent of 18-29-year-olds—25 percent of men, The dynamics of labor demand and supply 61 percent of women—are not employed, nor enrolled in are compromising Jordan’s economic and social education or training (DoS). 22 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION FIGURE 14 • Sectors Creating Most of the Jobs Tend to Be Less Productive and the Productivity of These Sectors Has Declined or Remained Stagnant 2.5 80 1.2 Construction Transport, 1.0 Log(sectoral productivity/total productivity, 2015) Low productive 70 2.0 Storage & but expanding Communications 0.8 1.5 Real Estate 60 0.6 Productivity, log change Mining and Percentage points Electricity and Quarrying 50 0.4 1.0 Water Finance and Insurance 0.2 Public Services Administration, 40 0.5 Defense, and 0.0 High productive but shrinking Social Security 30 –0.2 0.0 Manufacturing 20 –0.4 –0.5 Wholesale and –0.6 Retail Trade 10 –0.8 –1.0 Restaurant and 0 –1.0 Community,Social Construction Finance and Insurance Services Electricity and Water Real Estate Transport, Storage & Communications Mining And Quarrying Public Administration, Defense, & Social Security Wholesale And Retail Trade Community,Social and Personal Services Manufacturing Restaurant and Hotels –1.5 Hotels and Personal Services –2.0 –3 –2 –1 0 1 2 3 4 Change in Employment Shares (2000–2015) Labor Intensity, 2009 (left axis) Employment Share, 2015 Log productivity, change 2000–2015 (right axis) Source: Winkler and Gonzalez,(2019) based on DoS data. Inefficient firm dynamics lead to a stunted or more employees. And there is very little mobility: private sector dominated by small, low productivity almost all firms that were small in 2016 were still small firms. There is a persistently low rate of firm entry, well in 2019 (World Bank Enterprise Surveys), and over 80 below the average for upper middle-income countries (Figure 15).65 Firm growth is not driven by the most FIGURE 15 • New Business Density productive firms, and firms exiting the market are not (New Registrations Per 1,000 always the least productive. Inefficient firm dynamics People Ages 15–64) has resulted in a productive structure dominated by 7 small/micro, low-productivity firms: 43 percent of pri- 6 vate sector workers are employed in micro-enterprises 5 4 (less than 10 workers) (Figure 16), 80 percent of whom 3 are informal (accounting for 72 percent of all Jordanian 2 private sector informal workers) and earn, on average, 1 58 percent of the salary of employees of firms with 100 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 65 The percentage of ‘young’ firms (5 years or less) is also Egypt Jordan declining in Jordan, suggesting not just difficulties with Morocco Tunisia business registration but also increased exit of young Upper middle income firms (World Bank Enterprise Surveys: https://www. enterprisesurveys.org/en/enterprisesurveys). Source: WDI and World Bank staff calculations. Special Focus 23 percent of workers who were informal in 2010 remained Distribution of Jordanian Regular FIGURE 16 •  informal in 2016 (Jordan Labor Market Panel Survey). Employees in Private Sector (Share of Total in Percent) This is not a productive structure that will allow Jordan to compete with the rest of the 50 42.9 world, nor provide opportunities to Jordanians. With a small domestic market, the only option for 40 the Jordanian economy to grow sustainably and to 28.8 30 generate more and better jobs is to rely on exports 22.3 and to attract foreign investment. However, the cur- 19.6 18.3 17.3 16.0 20 rent productive structure is not oriented towards 11.9 12.5 10.4 this goal. In 2019, exports and FDI only accounted 10 for 36 percent and 1.6 percent of GDP, respectively (down from their respective peaks of 56 percent in 0 Less than 10 10 to 19 20 to 49 50 to 99 100+ 2008 and 24 percent in 2006). With accelerating technological change and globalization, this produc- Formal workers All workers tive structure will only cause Jordan to diverge further away from other upper middle-income countries. This Source: DoS and World Bank staff calculations. is because technological change and globalization are rewarding frontier firms at the expense of lagging firms,66 and rewarding countries with a high share of 66 Berlingieri, G., P. Blanchenay, and C. Criscuolo. 2017. productive firms at the expense of others with high The Great Divergence(s). OECD Science, Technology shares of lagging firms.67 Technological change is and Industry Policy Paper 39. Paris: OECD. also making jobs in high-income and upper-middle 67 Cristobal Ridao-Cano and Christian Bodewig, 2018. income countries more intensive in non-routine, Growing United: Upgrading Europe’s Convergence Machine, World Bank Group, Washington DC. cognitive and interpersonal tasks. Workers in Jordan 68 Asif M. Islam, Dalal Moosa, and Federica Saliola, perform significantly fewer of these tasks compared forthcoming. Jobs Undone: Reshaping the Role of to other upper middle-income countries like Turkey.68 Governments toward Markets and Workers in MENA, Thus, creating more and better jobs in Jordan World Bank Group, Washington DC. is mainly about increasing market contestability to 69 This section draws from Islam, Moosa, and Saliola ease firm entry, and to ensure efficient growth and (forthcoming), who collected and analyzed Product Market Regulations (PMRs) for Jordan and other exit of firms. This means that more productive firms MENA countries against 37 high-income and 14 upper- are the ones growing and creating the most jobs as well middle-income countries. PMRs directly affect market as staying in the market, while the least productive con- contestability through the costs that firms face when tract or exit the market.69 Jordan, as most other MENA they enter the market, and the degree of competition countries, lacks market contestability, favoring incum- between the firms that already exist in this market. The bent firms (SOEs or private) over new entrants. As an rigidity or flexibility of PMRs affect the number of firms that operate, their growth, and their ability to create jobs. illustration, 9 percent of firms are ‘politically connected’ 70 Meaning the owner, CEO, top manager or any of the (12 amongst larger firms), well above the average for board members of the firm has ever been elected or upper middle-income countries (4 percent).70 appointed to a political position (World Bank Enterprise Increasing market contestability involves, Survey, 2019). first and foremost, reducing state-induced dis- 71 State-Owned Enterprises NEPCO and WAJ create tortions in the product market. The presence of sizeable fiscal cost and contingent liabilities for Jordan. For instance, combined losses from just these two SOEs State-Owned Enterprises (SOEs) in natural monopolies, has been around 1 percent of GDP on average over like the National Electric Power Company (NEPCO) last three years. These are also expected to increase and the Water Authority (WA), may be justified, while significantly in future when the largest PPA related to keeping in mind the associated social and fiscal costs.71 energy and water sector comes on board. 24 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION However, the economic rationale for the presence and on hiring foreign workers in professional services. of SOEs in 14 other subsectors is unclear.72 There is Ongoing efforts and investments to improve the infra- often a lack of competitive neutrality (level-playing field) structure for business development should continue, between SOEs and private sector peers in sectors where including the infrastructure for the digital economy SOEs are active. Also, price controls are still prevalent (e.g., broadband internet, digital payments) and the in Jordan, including on staple foods, medicines, cellular financial infrastructure for accessing credit and other communications, and internet services. Even if well- financial services. All of the above horizontal reforms intended, these price controls lead to inefficiencies. to revitalize the private sector can also be comple- Beyond price controls, business regulations are also mented with targeted support to firms with the highest subject to frequent and unpredictable (for businesses) growth potential for employment, including female changes that are not based on impact assessments.73 and youth employment (e.g., ITO/BPO businesses), Creating employment opportunities in the aiming to help improve their performance and access private sector also requires reforms to public pay to new markets. and employment policies to reduce the public Labor and social insurance policies can sector wage premium. Private sector wages were help create more and better jobs while protecting stagnant during the 2010s, while public wages grew, workers. Labor regulations regarding the hiring and increasing the wage gap between the public and pri- firing of workers, as well as the setting of the minimum vate sectors (Winkler and Gonzalez 2019), reaching wage, should aim to protect workers while giving 25 percent in 2018. The wage premium in the public enough flexibility to firms to hire and fire in response sector relative to the private sector for a similar type to changes in demand. Social insurance programs of worker and job also increased during the 2010s, run by the Social Security Corporation (SSC) are reaching 18 percent in 2018. The public sector wage meant to protect workers throughout their careers premium is largest among the lowest wage decile and upon retirement, while minimizing distortions to (i.e., the poorest 10 percent of workers) (36 percent) the labor market. And labor programs should aim and becomes negative for the highest wage decile to help jobseekers connect to the labor market by (–5 percent).74 The wage premium matters because providing employability and job placement support. the public sector accounts for a high share of total employment (40 percent in 2020, up from 38 percent • Making labor regulations more pro- in 2010). As such, the wage premium tends to push employment. The GOJ has made good progress private sector wages up, particularly among low-skill in introducing flexible forms of employment, like workers, eroding competitiveness. The large wage part-time work, although more effort is needed to premium and size of the public sector also generate raise awareness among companies and workers. a fiscally unsustainable wage bill. Reducing them The ratio of the minimum wage (JD 260) to value requires reforming public employment and pay poli- added per worker (0.59) is relatively high,75 cies, an increase in the share of contracted workers although the minimum wage does not appear versus civil servants, and tying pay more closely to performance. 72 For example: air and road transportation; manufacture Beyond reducing distortions, it is important of refined petroleum products and chemicals; whole to continue reducing entry barriers and improving and retail trade; accommodation, food and beverage supporting infrastructures for businesses. Jordan services; insurance and pension funds. has made significant progress in reducing entry 73 Based on the assessment of PMRs in Jordan and the barriers, but there is still ample room to: (i) further views of business, as reflected in World Bank, 2021. 74 Javier Sanchez-Reaza, Mehtabul Azam, Carole streamline business registration; (ii) reduce entry bar- Chartouni, and Friederike Rother, forthcoming. Jordan’s riers in network industries and professional services Public-Private Compensation Premia, World Bank (e.g., accounting, legal, engineering); and (iii) reduce Group, Washington DC. restrictions on FDI (e.g., restrictions on joint ventures) 75 Islam, Moosa, and Saliola, World Bank, (forthcoming). Special Focus 25 to be too binding yet: there is not too much of the reason is that there are not enough jobs for concentration of private sector wages around the college graduates. But there is also a significant skills minimum wage, and most workers earn above it.76 mismatch: 53 percent of working youth do not have However, nothing prevents the minimum wage qualifications matching their occupation. Schools and from becoming binding and thus a constraint universities are not equipping youth with skills relevant to job creation. And the existence of a separate for the labor markets of both today and tomorrow— (lower) minimum wage for non-Jordanians is the result of a supply-driven education and training distorting the labor market. Thus, going forward, system. In the short-term, the priority is to invest in the priority would be to set up a single minimum demand-driven skills training for the workforce. Over wage for all workers as well as objective criteria the medium to longer term, reforms are needed to (e.g., productivity growth) for adjusting it. ensure all Jordanian children acquire minimum levels • Enhancing worker protection. Labor regula- of foundational 21st century skills, along with reforms tions and social insurance programs do provide to improve the quality and relevance of technical, the right protections, but most workers do not vocational and higher education.77 Specific reform benefit from them by virtue of being informal. En- priorities include: hancing labor inspection, including by making it more risk-based, will help much because most • Modernizing vocational education by: (i) chang- informal workers are employed in micro-firms. ing the ‘narrative’ of vocational education to one Thus, going forward, while efforts to ‘formal- that is not associated with failure and is future-ori- ize’ (i.e., have informal workers join mandatory ented, covering blue, grey, and white-collar qualifi- SSC programs) can continue, voluntary savings cations; (ii) planning and facilitating a gradual and schemes could also be considered to provide organic growth of vocational education over time; protection to informal workers with some capac- and (iii) introducing futuristic short-term courses ity to save in a financially sustainable way, as well that focus on the adoption of new technologies as providing complementary benefits to formal across sectors. sector workers. • Enhancing private sector participation by/ • Improving employment support. There is through: (i) leveraging/empowering Sector ample room to enhance employment support Skill Councils (SSCs) for market intelligence, through labor programs. The Ministry of Labor standards and job connections; (ii) short-term (MOL) is building an effective digital platform market-oriented courses (3–6 months) with credit to intermediate job-matching and employment links for horizontal and vertical mobility; and support, including through the recently launched (iii) Public-Private Partnerships (PPPs) in select and private sector-driven National Employment Vocational Training Centers (VTCs), and moving Program (NEP). The priority going forward towards the Al Hussein Technical University is to invest in impactful employment support (HTU) model of active private sector involvement programs, targeting youth and women. 76 According to the Employment and Unemployment Policies to revitalize the private sector to Survey data from DOS, about 17 percent of workers create more and better jobs need to be accom- earn JD 240 and 280 per month in 2018, 13 percent panied by efforts to improve the skills of the if only considering formal sector workers. And 64 workforce. Jordanian youth are becoming more edu- percent of workers earn JD 300 or more (76 percent for cated (half of 25–29 year-olds are college-educated, formal sector workers, which is consistent with the data from Social Security Corporation (SSC) for registered well above the OECD average). Yet, unemployment workers). among college-educated workers is higher than for 77 ‘21st Century Skills’ include strong foundational any other education group and it is increasing (25 cognitive and socioemotional skills, as well as technical, percent in 2019, up from 16 percent in 2010). Part digital, and entrepreneurship skills. 26 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION in skills development and vocational training index for 2021 ranks Jordan 178 out of 190 programs. countries. Priorities for reform include the Labor • Making skills aspirational by/through (i) skill Law (e.g., to address sexual harassment and to competitions; (ii) communication (social media introduce paternity leave), Child Rights Law, and and digital marketing; and (iii) international the Personal Status Code (asset ownership), as connections, making Jordan a skill hub in well as ensuring laws protecting the rights of specific upcoming sectors linked to global women are implemented. market demands (e.g., cybersecurity, business • Enabling the private sector to become the process automation). main job creator for women. Women are a great • Streamlining institutions by/through: (i) re- potential source of private sector growth. Tapping forming the Technical Vocational Skills Develop- on that potential will take more information about ment Council (TVSD) and Commission (TVSDC); and encouragement for women to work in the (ii) promoting a coordinated (MOL, Ministry of private sector, but also: (i) increasing gender Education (MOE) and other relevant ministries in- diversity in the workplace and company boards, volved in skills development) approach, including including through the use of role models and clarifying roles, responsibilities and leadership; champions; (ii) focusing on sectors with potential and (iii) introducing a Labor Market Information for female employment growth, including tourism System (LMIS). and digital, as well as ‘satellite’ companies in ITO/BPO, food processing and manufacturing; Specific measures are needed to create and (iii) improving public transportation. opportunities and lift constraints to female • Expanding access to quality childcare. Less employment. Women are far less likely than men than 1 percent of children under the age of 5 to be in the labor force—female participation rates have access to formal childcare, and 25 percent peak at age 24. Women are also more likely to be of jobless women say they would be willing to unemployed and earn 14 percent less than men with work if childcare services were available (World similar characteristics. And yet women are becoming Bank, forthcoming). Expanding access to as educated (if not more) than men, and value work quality childcare would not only allow for more (almost) as much as men,78 and 60 percent of job- women to work but it will also create more job less women would like to work.79 Why? social norms opportunities for women. Reform priorities are a big driving factor, but global experience shows include: (i) streamlining licensing of childcare that norms change as more women join the labor providers; (ii) professionalization of care force. How? by implementing all the above policies workers; (ii) repurposing community centers for to create more and better jobs, but also by creating childcare and after-school service provision; and opportunities for and lifting specific constraints to (ii) targeted support to new providers. female employment. Some of the key measures that • Increasing women’s financial inclusion and could be taken, including: entrepreneurship. Women have more limited access to finance than men, which constraints • Eliminating legal restrictions to women’s female entrepreneurship. Reform priorities participation in the economy. Despite progress include: (i) investment and exports related in recent years, legal restrictions still exist around getting a job, pursuing a trade/profession, choosing working hours, traveling, being a 78 According to the 2018 World Values Survey, nearly 80 percent of Jordanian women think that work is a very/ household head, or choosing where to live—all rather important part of life (90 percent of men do). of which directly impact women’s opportunities 79 World Bank (forthcoming). Childcare Services in Jordan: to participate in the economy on equal terms to Assessment of Supply and Demand, Mashreq Gender men. The Women, Business and the Law (WBL) Facility, World Bank, Washington DC. Special Focus 27 reforms to facilitate growth of female-owned in this note shows that the main reason why there are business; and (ii) diversifying credit products and not enough jobs of good quality is because the private services, alongside targeted financial literacy sector is stunted. Thus, reducing unemployment and training, to expand women’s access to credit. job informality for Jordanians (and non-Jordanians) requires, first and foremost, revitalizing the private The jobs reform agenda laid out in this note sector, to be accompanied by efforts to encourage is not without challenges, but the status quo is not the upskilling of the workforce to meet the demands an option, and the experience in Jordan and else- in today’s market and the markets of the future. where offers some guidance on the way forward. Labor policies can help, as can specific measures to The approach so far in Jordan has been to tackle the increase female employment. Thus, any jobs reform jobs issue as a problem that can be mainly addressed agenda in Jordan should include all these policy through labor policies or policies that replace non- areas. The experience from Jordan and elsewhere Jordanian workers with Jordanian workers. Some also point to the need to ensure private sector and have also suggested that a big part of the problem is public support for reforms, as well as the continuity of brain-drain to GCC countries. The evidence presented the reform agenda across administrations. 28 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION ANNEX 1 The Government of Jordan’s • Launch infrastructure projects and partnership Economic Priorities Program projects with the private sector: On 29 August 2021, the government presented its Project economic priorities program for 2021–23, aimed at supporting economic growth and recovery from the 2021 projects Amount impact of the COVID-19 pandemic. The total value Build 15 new public schools JD30 million of the program stands at JD480 million, of which High-speed buses between Amman and Zarqa JD30 million JD200 is financed from foreign assistance. Moreover, Buildings, cargo, and passenger yards in King JD96 million major projects in partnership with the private sector Hussein Bridge border crossing are estimated at about JD3.8 billion. The program Irbid Central Market JD60 million includes 53 priorities distributed over 3 main areas: National water carrier JD2 billion (1) Improving the investment Use solar thermal energy in government and military JD30 million hospitals environment and doing business: 2022 projects • Develop a legislative and institutional environment National railway network project JD1.6 billion conducive to investment and doing business. Regional electrical interconnection projects JD55 million • Reduce the cost of electricity, restructuring Production expansion in Hamza oil field JD17.2 million customs tariffs, and facilitating access to finance. Production expansion in Risha gas field JD38 million • Accelerate the digitization and stimulate Public transport service.s JD2 million investment and stimulating the capital market. 29 Enhancing competition and (2)  • Agricultural sector: Increase agricultural output stimulating the private sector to by more than 20 percent by 2023: provide sustainable employment • Encourage adoption of modern agricultural opportunities: technology. • Grant JD10 million in loans to agricultural • Amend legislation and procedures to ensure fair initiatives that use automated, digital, modern competition and ease of entry to the local market. processes, technologies, or procedures. • Amend the Social Security Law to reduce • Establish an agricultural marketing company (at contributions for new subscribers and link JD7 million) to develop and operate an online contributions to economic performance. platform for marketing and exporting. • Amend the Labor Law with the aim of creating a • Explore investment opportunities for food safe working environment for women. processing with the private sector. • Extend the sustainability program until end-June • Information Technology: Promote Jordan as 2022, at a value of JD 30 million. a regional center for digital transformation and • Launch of the National Employment Program IT services by developing a roadmap to launch (direct support for insurance contributions, wage the 5th generation domain and attracting 10 support, and skills development) at a value of investment opportunities in supportive fields. JD80 million. • Industrial sector: Support the growth and export potential of the industrial sector by providing (3)  Supporting priority economic sectors: infrastructure that stimulates investment. • Tourism sector: Attract 4.5 million tourists to Jordan by 2023. Project Amount Support low-cost charter flights and bring in an JD42.8 million additional low-cost charter carrier. Enhance competitiveness by reviewing legislation JD 200,000 related to the tourism sector. Launch new tourism identity for Jordan. JD1.5 million Develop and promote service and tourism products. JD20 million Provide financial facilities for at least 90% of the JD20 million businesses affected by the pandemic. Increase the interaction rate on digital JD15.8 million communication channels by 10% by 2023. Launch electronic visas for target countries 30 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION ANNEX 2 Selected Recent World Bank Publications on Jordan (for an exhaustive-e list, please go to: http://www.worldbank.org/en/country/jordan/research) Title Publication Date Document Type Jordan – Addressing Fiscal Commitments and Contingency Liability Management for PPP Projects March 14, 2022 Brief in Jordan Jordan Economic Monitor – Spring 2021: Uncertain and Long Trail Ahead June 23, 2021 Report The Business Case for Investing in Women’s Employment in Jordan Case Study: Umniah – Safe June 17, 2021 Report and Respectful Workplaces Education Expenditure, Enrolment Dynamics and the Impact of COVID-19 on Learning in Jordan April 28, 2021 Working Paper The Amman Climate Plan: A Vision for 2050 Amman March 31, 2021 Report Jordan Economic Monitor – Fall 2020: Navigating through Continued Turbulence March 1, 2021 Report Fiscal Policy, Poverty and Inequality in Jordan: The Role of Taxes and Public Spending – Policy March 1, 2021 Working Paper Summary Hashemite Kingdom of Jordan - Social Security Corporation (SSC): Toward Coverage Expansion March 1, 2021 Report and a More Adequate, Equitable and Sustainable Pension System The Lives and Livelihoods of Syrian Refugees in the Middle East: Evidence from the 2015–16 July 21, 2020 Policy Research Working Surveys of Syrian Refugees and Host Communities in Jordan, Lebanon, and Kurdistan, Iraq Paper (continued on next page) 31 (continued) Title Publication Date Document Type Coping with the Influx: Service Delivery to Syrian Refugees and Hosts in Jordan, Lebanon, and July 21, 2020 Policy Research Working Kurdistan, Iraq Paper The Fallout of War: The Regional Consequences of the Conflict in Syria June 17, 2020 Report Jedad: Promoting Market Opportunities for Refugee and Host Community Businesses in Jordan June 9, 2020 Report Jordan Economic Monitor – Spring 2020: Weathering the Storm June 1, 2020 Report Estimating Poverty for Refugee Populations: Can Cross-Survey Imputation Methods Substitute for December 3, 2019 Policy Research Working Data Scarcity? Paper Measuring Social Norms About Female Labor Force Participation in Jordan June 26, 2019 Policy Research Working Paper 32 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION ANNEX 3 Summary of Special Focuses from the in its produced capital growth by improving its Latest Jordan Economic Monitors business climate and regulatory environment. Fall 2021 JEM: “Public Transportation Fall 2021 JEM: “How wealthy is Jordan? Challenges in Jordan” Measuring Jordan’s comprehensive wealth using Wealth of Nations Approach (1995– There are significant development constraints to 2018)” public transportation in Jordan. Looking at various sources, the costs are estimated to be at least six The lackluster growth of Jordan’s economy in the percent of GDP a year, not counting the adverse most recent decade has been compounded with impact poor transportation services pose to women’s slow wealth accumulation. During 2010–18, Jordan’s employment. Jordan has historically prioritized per capita wealth has been on a declining trend. As investing in transportation infrastructure with limited a result, the wealth gap with upper middle-income attention being paid to services such as public countries significantly widened by year 2018; a typical transportation. While this has resulted in significant UMIC citizen had 4.3 times as much wealth as a new transportation infrastructure, it has also resulted typical Jordanian. Moreover, Jordanian citizen wealth in inefficient, uncoordinated, and unreliable public in 2018 was five percent lower than in 1995. Given transit services leading to a low ridership and limited natural resources in Jordan, convergence limited access for most Jordanians, particularly toward upper middle-income countries would require women, youth, and those with reduced mobility. The Jordan to focus its polices on building human capital government launched initiatives to improve the public and increasing the efficiency of asset utilization. transportation system, but implementation has been Moreover, Jordan also needs to unblock bottlenecks slow. Going forward, policy reforms should focus 33 squarely on the goal of effecting a modal shift from challenges. More than half of the population in Jordan private cars to public transportation. is not yet effectively covered by contributory social security programs. Although designed to be financially Spring 2021 JEM: “A year into the self-sustainable, the contributory pension program pandemic: Jordan’s private sector is actually unsustainable. The program also creates snapshot” inequities, and adverse incentives. Despite some past reform efforts, the program has still considerable Surveys conducted by the WBG show that, a year parametric inconsistencies (benefit promises are not in into the pandemic, the lockdowns and demand line with contribution rates and retirement ages). Such shocks have had a strong impact on the private inconsistencies are bridged, at the moment, by favorable sector, including high closure rates, particularly in the demographics, but in less than a decade, revenues from services sector. Liquidity remains a major issue for contributions will not be enough for pension spending. firms. To respond to the challenges, Jordanian firms There are some potential solutions and proposals have introduced new products and are using digital that Jordan could adopt in order to improve pension technologies more intensively. However, the pace outcomes, and its financing mechanisms. of transformation has lagged other countries. The programs put forward by the government to support Fall 2020 JEM: “The Incidence of Taxes the recovery have reached a significant share of and Public Spending in Jordan” companies interviewed, but some gaps remain. The degree to which different households contribute Spring 2021 JEM: “COVID-19 and to and benefit from fiscal policies varies across inequality in the MENA region and in income distribution. Taken together, the overall Jordan” allocation of taxes (personal income tax and sales taxes) and public spending (cash transfers, water The COVID-19 pandemic has thrown entire economies and electricity subsidies, and health and education into disarray and upended livelihoods. Despite being in-kind benefits) in Jordan is modestly progressive. initially heralded as the “great equalizer,” new evidence The fiscal system helps to reduce inequality, though has shown that the consequences of COVID-19 have much of the effect comes from in-kind benefits and been borne unequally, disproportionately affecting the pattern of taxes and cash spending could be the poor and vulnerable. This Special Focus looks at made to benefit the poor and middle class further. In the inequality-enhancing effects of COVID-19 in the comparing Jordan with other countries, it is evident MENA region, with a special zoom in on Jordan. that more could be achieved. Further, Jordan’s need for fiscal consolidation can be compatible with the Fall 2020 JEM: “Moving Toward an goal of reducing poverty and inequality. The recent Equitable and Sustainable Pension and expansion of social assistance programs is making Social Insurance in Jordan” Jordan’s fiscal policies more equalizing and additional reforms to sales taxes and electricity subsidies Addressing pension and social insurance issues means present opportunities to make the fiscal system more addressing financial, fiscal, social, and economic progressive without increasing spending. 34 JORDAN ECONOMIC MONITOR: GLOBAL TURBULENCE DAMPENS RECOVERY AND JOB CREATION 1818 H Street, NW Washington, DC 20433