JORDAN ECONOMIC MONITOR Building Success, Breaking Barriers Unlocking the Economic Power of Women in Jordan Fall 2023 Middle East and North Africa Region 2 © 2023 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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Photos used with the permission of Zurijeta, Julius Bramanto, and World Bank. Cover photo design by BigAD communication. 3 Preface The Jordan Economic Monitor (JEM) provides an update (Senior Health Economist). It has benefitted from on key economic developments and policies over the past comments from Norbert Fiess (Lead Economist) and six months. It also presents findings from recent World Daniel Lederman (Lead Economist and Deputy MENA Bank analytic work on Jordan. The JEM places them in a Chief Economist). longer-term and global context and assesses the implications of these developments and other changes in The Jordan Economic Monitor has been completed under policy on the outlook for Jordan. Its coverage ranges from the guidance of Eric Le Borgne (Practice Manager), Holly the macro-economy to financial markets to indicators of Benner (Resident Representative), and Jean-Christophe human welfare and development. It is intended for a wide Carret (Regional Director). audience, including policymakers, business leaders, The findings, interpretations, and conclusions expressed in financial market participants, and the community of this Monitor are those of the World Bank staff and do not analysts and professionals engaged in Jordan. The data cut- necessarily reflect the views of the Executive Board of The off for this Jordan Economic Monitor is end-October World Bank or the governments they represent. 2023. For questions and comments on the content of this The Jordan Economic Monitor is a product of the Middle publication, please contact Hoda Youssef East and North Africa (MENA) unit in the (hyoussef@worldbank.org). Nabeel Darweesh (External Macroeconomics, Trade and Investment (MTI) Global Affairs Officer) is the lead on communications, outreach, Practice in the World Bank Group. This edition was led by and publishing. To be included on an email distribution list Hoda Youssef (Senior Economist, MTI), with significant for this or other related publications and for questions contribution from Ramy Oraby and Sarah Farid from the media, please contact him at (Consultants). The special focus was prepared based on ndarweesh@worldbankgroup.org. For information about analytical work undertaken by Jonna Maria Lundvall the World Bank and its activities in Jordan, including e- (Senior Social Scientist), Nour Al Moghrabi (Consultant), copies of this publication, please visit Muneeza Alam (Senior Transport Economist), Mira Morad www.worldbank.org/en/country/jordan. (Senior Transport Specialist), Manjula Luthria (Senior Economist), Rada Naji (Social Protection Specialist), Zaina Diwani (Senior Education Specialist) and Reem Hafez 4 5 Table of Contents Acronyms and Abbreviations.............................................................................................................................................................. 9 Executive Summary............................................................................................................................................................................. 10 A. Recent Economic Developments............................................................................................................................................. 12 1. Real Sector and Labor Market ..................................................................................................................................................... 12 2. Fiscal and Debt Developments ................................................................................................................................................... 15 Box 1. Evolution of Jordan’s gross government and guaranteed debt....................................................................................... 17 3. External Sector Developments.................................................................................................................................................... 22 4. Monetary Policy and Inflation ..................................................................................................................................................... 24 B. Outlook and Risks ........................................................................................................................................................................ 26 Box 2. Mapping out the potential impact of the conflict in the Middle East on the Jordanian economy ........................... 28 Annex 1. Summary Revisions to Jordan National Accounts ........................................................................................................... 33 In Focus: Unlocking the Economic Power of Women in Jordan.......................................................................................... 36 Box 3. Recent and Ongoing GoJ Initiatives in Support of Women’s Economic Participation ............................................. 42 Annex 2. Global Evidence Suggesting Impactful Policy Measures for FLFP .............................................................................. 52 References ................................................................................................................................................................................................ 53 6 List of Figures and Tables Recent Economic Developments Figure 1. 1 Jordan has one of the slowest growth trajectories compared to peer countries ....................................................... 12 Figure 1. 2 Services continue to lead growth, with robust contribution from industry and agriculture ..................................... 12 Figure 1. 3 Growth in tourism receipts for all purposes normalized in H1-2023, with fastest growth in business tourism .. 13 Figure 1. 4 Travel arrivals are equally distributed by region/country of origin .............................................................................. 13 Figure 1. 5 All labor market indicators remain unfavorable .............................................................................................................. 13 Figure 1. 6 Unemployment is still high, particularly among women ................................................................................................ 13 Figure 1. 7 High-productivity sectors are growing faster, but their employment share remains modest ................................... 14 Figure 1. 8 CG fiscal consolidation on track, supported by enhanced revenues and lower subsidy spending ......................... 15 Figure 1. 9 Revenues increase was driven by both tax and non-tax revenues, despite lower grants........................................... 15 Figure 1. 10 Increased capital expenditure and interest payments were offset by lower subsidies spending ............................ 16 Figure 1. 11 The CAD improved in H1-2023 driven by services balance and a shrinking trade deficit .................................... 23 Figure 1. 12 H1-2023 saw a contraction in both energy and non-energy imports ......................................................................... 23 Figure 1. 13 Portfolio investment have increased in 2023 while FDI has stabilized ..................................................................... 23 Figure 1. 14 Reserves stabilized around end-2022 level ..................................................................................................................... 23 Figure 1. 15 Annual headline inflation rate decelerated significantly in 2023 ................................................................................. 24 Figure 1. 16 The deceleration has been supported by favorable base effects and muted monthly inflation ............................. 24 Figure 1. 17 Muted monthly inflation was supported by negative contribution from fuel items ................................................ 24 Figure 1. 18 Real interest rates continued to increase since Q2 2022, Percent............................................................................... 25 Figure 1. 19 The REER depreciated on annual terms for the fifth consecutive month ............................................................... 25 Figure 1. 20 Broad money annual growth rate slowed down to the slowest pace since 2019...................................................... 25 Figure 1. 21 NFA contribution to broad money annual growth rate turned positive ................................................................... 25 Boxes Figure B. 1 Gross Government and Guaranteed Gross Debt .......................................................................................................... 17 Figure B. 2 Foreign Currency Debt ....................................................................................................................................................... 17 Figure B. 3 Debt accumulation and NGDP ......................................................................................................................................... 17 Figure B. 4 Change in Gross Central Government and Guaranteed Gross Debt and its Drivers .............................................. 18 Figure B. 5 Central Government Gross Debt...................................................................................................................................... 19 Figure B. 6 Guaranteed Gross Debt ...................................................................................................................................................... 19 Figure B. 7 Domestic Currency Debt .................................................................................................................................................... 19 Figure B. 8 Holders of Domestic Currency Debt ............................................................................................................................... 19 Figure B. 9 Claims on Central Government ......................................................................................................................................... 19 Figure B. 10 Weighted Average Debt Maturity.................................................................................................................................... 19 Figure B. 11 Holders of Foreign Currency Debt ................................................................................................................................. 20 Figure B. 12 Breakdown of Multilateral creditors ............................................................................................................................... 20 Figure B. 13 SSIF Holdings of Government and Guaranteed Gross Debt .................................................................................... 21 Figure B. 14 Share of SSIF purchases of new debt ............................................................................................................................. 21 Figure B. 15 Stock of Treasury bonds held by SSIF ........................................................................................................................... 21 Figure B. 16 Government and Guaranteed Debt, net of SSIF Holdings, Percent of GDP......................................................... 21 Figure B. 17 Interest Payments ............................................................................................................................................................... 21 Figure B. 18 Average Debt Interest Payments 2017-2021, Percent of fiscal revenues ................................................................. 21 Figure B. 19 Average Debt Service 2017-2021, International Comparison .................................................................................... 22 Figure B. 20 Foreign Currency Debt and Debt Service ..................................................................................................................... 22 Figure B. 21 GDP Growth rate – Tourism and other sectors .......................................................................................................... 29 Figure B. 22 Potential impact of lower travel receipts on CAD ....................................................................................................... 29 7 Figure B. 23 Brent Price........................................................................................................................................................................... 30 Figure B. 24 Destination of Jordanian................................................................................................................................................... 30 Figure B. 25 Jordan’s EMBI spreads ..................................................................................................................................................... 31 Annex Figure A. 1 Revisions to Real GDP Growth ........................................................................................................................................ 33 Figure A. 2 Major Revisions to Real GDP by Sector ......................................................................................................................... 33 Figure A. 3 The upward revisions of nominal GDP led to lower deficit-to-GDP ratio ............................................................... 33 Figure A. 4 The upward revision of nominal GDP led to lower debt-to-GDP ratios .................................................................. 34 Figure A. 5 The upward revision of nominal GDP led to lower current account deficit ............................................................. 34 Figure A. 6 Revised FDI and exports figures reflect the change in their respective values and in nominal GDP (in percent of GDP)...................................................................................................................................................................................................... 34 Tables Table 1. Jordan - Selected Economic Indicators (2019-2025) ........................................................................................................... 32 Table 2. Summary of Revised Main Macroeconomic Indicators and WB Revised Projections .................................................. 35 Focus Chapter Figure 2. 1 Gender gaps are prevailing at all stages ............................................................................................................................. 37 Figure 2. 2 Women with no or less education are less likely to enter the labor market ................................................................ 37 Figure 2. 3 Health outcomes reflect good access to quality reproductive and child healthcare................................................... 38 Figure 2. 4 More than a third of women in reproductive age suffer some health complications ................................................ 38 Figure 2. 5 No gender gap in access to ECE… ................................................................................................................................... 39 Figure 2. 6 …but overall poor access affects literacy and numeracy skills for boys and girls ...................................................... 39 Figure 2. 7 Enrolment in education is high but educational attainment is much lower ................................................................ 39 Figure 2. 8 Women are much less economically active than men, notably after marriage............................................................ 40 Figure 2.9 When jobs are scarce, should men have more right to get a job than women?........................................................... 41 Figure 2. 10 Traditional jobs are perceived as ideal occupations for women. ................................................................................ 41 Figure 2. 11 Only certain jobs acceptable to Jordanian youth ........................................................................................................... 42 Figure 2. 12 Geographic distribution of nurseries ............................................................................................................................... 45 Figure 2. 13 Geographic distribution of 0-5 children ......................................................................................................................... 45 Figure 2. 14 More than two thirds of mothers are willing to up take childcare services............................................................... 45 Figure 2. 15 Cost and availability are top reasons for not sending children to childcare .............................................................. 46 Figure 2. 16 People in the central areas of Jordan can access much larger share of jobs ............................................................. 47 Figure 2. 17 Women in Amman rely more on private transportation means ................................................................................. 48 Figure 2. 18 Several challenges and improvements are identified by women public transport users ......................................... 48 Figure 2. 19 There is no silver bullet: a full range of priorities is needed to improve women’s economic participation ........ 51 8 Acronyms and Abbreviations 8M-2023 First eight months of 2023 LFP Labor Force Participation H1-2023 First half of 2023 LHS Left-hand-side H1-2022 First half of 2022 MENA Middle East and North Africa BoP Balance of Payments MIF Military Insurance Fund BRP Bus Rapid Transit MOF Ministry of Finance Bps Basis points MOH Ministry of Health CAD Current Account deficit MoSD Ministry of Social Development CBJ Central Bank of Jordan MTI Macroeconomics, Trade and Investment CG Central Government NDA Net domestic assets CHIP Civil Health Insurance Program NEPCO National Electricity Power Company CPI Consumer Price Index NEET Not in education, employment, nor training COVID-19 Coronavirus Disease 2019 NFA Net foreign assets DHS Demographic and Health Survey PIM Public Investment Management DoS Department of Statistics PPP Public Private Partnership ECE Early childhood education Q1 First Quarter EGRA Early grade reading assessment Q2 Second Quarter EFF Extended Fund Facility Q4 Fourth Quarter e.o.p. End-of-period T-bills Treasury bills FLFP Female Labor Force Participation T-bonds Treasury bonds FCU Fiscal Cost Unit TVET Technical and Vocational Education and Training FDI Foreign direct investment TEA Total entrepreneurial activity f.o.b. Free on Board ToT Terms of Trade FY Fiscal Year REER Real Effective Exchange Rate GRB Gender-responsive budgeting RHS Right-hand-side GDP Gross Domestic Product SDR Special drawing rights GoJ Government of Jordan SMEs Small and medium-sized enterprises GST General Sales Tax SSC Social Security Corporation GNI Gross National Income SOE State owned enterprise GNFS Goods and nonfactor services SSIF Social Security Investment Fund HCR Human capital report U.S. United States IMF International Monetary Fund USD United States Dollar JEM Jordan Economic Monitor WAJ Water Authority of Jordan JD Jordanian Dinar WB World Bank KG Kindergarten education WBG World Bank Group 9 Jordan Economic Monitor Fall 2023 Executive Summary Jordan has prudently navigated difficult times, Annual headline inflation decelerated showing resilience in the face of several external significantly in 2023, supported by monetary shocks. Notwithstanding the post-COVID policy tightening and lower commodity prices. recovery, the country has been navigating through a Annual headline inflation continued to decelerate to low-growth equilibrium hovering around an average 1.4 percent in October 2023, down from its peak of of 2.2 percent over the past decade (2012-2022). 5.4 percent in September 2022. The deceleration has Real GDP growth registered 2.4 percent in 2022 and been supported by a favorable base effect and muted has accelerated to 2.7 percent in H1-2023, compared monthly inflation, mainly driven by lower fuel and to a pre-COVID-19 (2012-2019) average of 2.4 transportation prices and the contained effect from percent.1 Growth was supported by a robust food and core items prices. Since March 2022, the contribution from services (driven by transport and Central Bank of Jordan (CBJ) has raised its key communications, finance and insurance and policy rate by 525 basis points to reach the highest wholesale and retail trade activities), in addition to level since 2006/07, making Jordan one of the few manufacturing and a rebound in agriculture. countries in the region with positive real policy rates. Meanwhile, the hotels and restaurants sector Jordan’s central government fiscal balance was witnessed its highest annual growth since Q2 2022 supported by economic growth and revenue- (also reflecting the strong rebound of tourism and enhancing reforms, whereas total expenditure travel receipts), but its contribution to overall grew at a slower pace. The Central Government growth remains marginal given its low weight in the (CG) fiscal deficit (including grants) narrowed to 5.6 economy. percent of GDP in 2022, and the primary balance Despite the growth recovery, entrenched recorded a surplus of 0.3 percent of GDP in 7M- structural constraints continue to weigh on 2023. The revenues increase in the first seven labor market outcomes. Labor force participation months of 2023 is mainly driven by improvements continued its gradual decline to 33.0 percent in Q2- in non-tax revenues, despite the decline in foreign 2023, down from 39.2 percent in 2017. The decline grants. On the other hand, an increase in total is driven by a fall in both male and female expenditure in 2022 was mainly driven by the re- participation. At 13.8 percent in Q2-2023, Jordanian introduction of fuel and food subsidies as part of the female labor participation remains among the lowest government response to inflationary pressures from in the world. Equally concerning, the overall high global commodity prices. With the removal of employment rate has declined to 25.6. percent in fuel subsidies in 2023, lower spending on (mainly Q2-2023 and remains well below the pre-COVID- food) has offset the increase in interest payments 19 average of 31.2 percent (2012-2019). Despite and capital expenditure. lower participation, unemployment inched up to Notwithstanding the improved fiscal 22.3 percent in Q2-2023, remaining well above the performance, debt-to-GDP continues to rise pre-COVID average of 15.1 percent (2012-2019). from already elevated levels. Gross government and guaranteed debt2 continued to grow - with 1Jordan’s real and nominal GDP figures for 2020-22 2 The Central Government debt covers (1) the budget were largely revised in October 2023, resulting in sector debt; and (2) the guaranteed debt of 57 government changes to real sector developments, as well as fiscal, units including the National Electric Power Company debt, monetary and external sector data measured as (NEPCO) and the Water Authority of Jordan (WAJ). The ratios-to-GDP. Upward revisions of export and FDI General government debt consolidates the above with the data for 2022 and Q1-2023 also resulted in a government debt held by the Social Security Corporation reduction in the current account deficit. 10 Jordan Economic Monitor Fall 2023 persisting pressures from the electricity and water On the external front, the current account is sectors, reaching 111.4 percent of GDP in 2022 expected to benefit from the recovery in travel (from 108.8 percent of GDP in the previous year). receipts and easing pressures on global commodity General government debt (which nets out the SSIF prices. holdings) also increased to 88.8 percent of GDP in The global environment remains challenging. 2022, up from 87.5 percent in the previous year. As Major central banks have pushed their policy rates of July 2023, gross government and guaranteed debt to the highest levels in years and signaled that tight increased to JD40.1 billion, up from JD38.5 billion monetary conditions may continue until there is at the end of December 2022, primarily due to concrete evidence that inflation is moving back to its higher foreign currency debt following the issuance targeted levels. This has increased the cost of of $1.25 billion (JD 0.9 billion) Eurobonds. Box 1 financing and is eating up the limited fiscal space. At presents more details on the evolution of public debt the same time, global growth as well as that of over the past 25 years. Jordan's main trading partners is expected to External accounts remain negative but are decelerate in 2023, and then to stabilize broadly improving in H1-2023, supported by an increase thereafter. The prices of Jordan's key imported in travel receipts and a narrowing trade deficit. commodities (e.g., oil and wheat) have returned to The current account deficit narrowed to 7.7 percent their level before the Russian invasion of Ukraine. of GDP in 2022, due to the sustained recovery in However, international oil prices increased travel receipts and despite a widening trade deficit. significantly following OPEC+ production cuts and Meanwhile, the capital and financial account surplus the onset of the ongoing conflict in the Middle East. declined in 2022, leading to a deterioration in the The Special Focus highlights the role of women balance of payments (BoP) to a deficit of 1.5 percent and their increased economic participation as of GDP. The current account continued to benefit central to Jordan’s development agenda. The from further pickup in travel receipts in H1-2023 piece takes a life-cycle approach, and follows the and narrowing trade deficit (mainly owing to a journey of girls and women from birth (looking at contraction in oil imports) despite lower the access to essential reproductive and child health remittances. Additionally, the capital and financial services), through education and into the labor accounts surplus witnessed an increase, leading to a market. It sheds light on the barriers to women’s shrinking of the BoP deficit. increased participation in the economy, starting with Going forward, growth is expected to reach 2.6 females’ (as well as males’) low education attainment percent in 2023, primarily propelled by the despite high enrollment rates in the early stages of services sector. A subsequent deceleration to 2.5 education. As they get prepared to enter the labor percent is anticipated in 2024, followed by a market, women face a series of barriers that may resurgence to 2.6 percent thereafter. While inflation deter them, including caregiving responsibilities, is expected to remain contained, social welfare public transportation, in addition to the prevailing remains threatened by several factors, including the social norms, among others. This piece builds on inability of the private sector to absorb a growing recent analytical work and surveys to provide labor force and to keep up with public sector wages, granular information on the availability and as well as cuts in humanitarian assistance. affordability of childcare provision, as well as on Meanwhile, fiscal consolidation will continue to women’s concerns when using public transportation build on the growing domestic revenues, leading to (for example relating to comfort, wait times, safety an expected narrower deficit of 5.1 percent of GDP. and accessibility). (SSC), which is currently running an annual surplus through its investment agency, the Social Security Investment Fund (SSIF) (see Box 1 for more details). 11 Jordan Economic Monitor Fall 2023 A. Recent Economic Developments 1. Real Sector and Labor Market arrivals losing some momentum compared to the previous quarters (Figure 1.4). Recent data show Promising sectors are driving growth, but labor that total arrivals increased by 51 percent during market outcomes are yet to follow. 7M-2023 compared to the corresponding period of 2022, with a marked pickup (of 76 percent) in single- Jordan has been trapped in a low-growth day tourists, which represent 17 percent of total equilibrium averaging 2.2 percent over the past arrivals. decade, one of the slowest trajectories in Figure 1. 1 Jordan has one of the slowest growth comparison to similar countries (Figure 1.1). trajectories compared to peer countries After reaching 2.4 percent during 2022,3 real GDP 10-year average growth (in percent, y-o-y) growth accelerated to 2.7 percent during H1-2023. Growth was propelled by a strong contribution 8 6 from services – with transport and communications, 4 finance and insurance and wholesale and retail trade 2 of 0.9 percentage points, combined (Figure 1.2), in 0 -2 addition to a robust contribution of 0.3 percent -4 from the agriculture sector (partially due to -6 favorable base effects). The industrial sector also -8 -10 continues to register robust contributions to -12 growth, with manufacturing growing by 3.6 percent Tunisia Algeria Jordan Arab World Morocco MENA Egypt LMI Malaysia Philippines Turkey India Vietnam and mining by 3.9 percent. The latter has underperformed in 2022 compared to expectations given the high potash and phosphate prices (2.9 2012-2022 average growth percent growth in 2022), albeit remaining higher 2020 growth than its historical average. Meanwhile, the Source: World Development Indicators restaurants and hotels sector grew by 5.8 percent, Figure 1. 2 Services continue to lead growth, with but its contribution to overall growth remains robust contribution from industry and agriculture marginal (0.1 ppts) given its low weight in the Percentage points, y-o-y growth economy (1.4 percent of GDP). 4.0 The recovery in tourism and travel receipts was 3.0 broad-based across travel categories and 2.0 country/region of origin in 2022. Similar to other 1.0 key MENA tourism countries, all travel purposes 0.0 continued to expand in H1-2023, albeit at a slower -1.0 rate after witnessing a strong rebound in 2022. -2.0 Business-related travel was the fastest growing 2018 2019 2020 2021 2022 H1-2021 H1-2022 H1-2023 purpose for travel during the first half of 2023 (Figure 1.3). The composition of country/region of origin has slightly shifted, with non-Arab travel Agriculture Industry Services arrivals witnessing the strongest increase of 109 Net Taxes Real GDP percent in H1-2023 compared to the same period in 2022, and Jordanians’ and other Arab nationalities’ Source: Department of statistics (DoS) and WB staff calculations 3 Growth had slowed to 2.0 percent during Q4-2022, the slowdown came on the back of a short-lived contraction slowest registered pace since Q1-2021, resulting in in mining and quarrying as well as a slowdown in slightly lower growth for 2022 than initially expected. The manufacturing. 12 Jordan Economic Monitor Fall 2023 Figure 1. 3 Growth in tourism receipts for all purposes narrow the gap between them to accelerate growth. normalized in H1-2023, with fastest growth in Employment rates have inched down (25.6 percent business tourism in Q2-2023, from 26.1 percent in Q2-2022) and Y-o-y growth, percent remain low reflective of modest job creation (Figure 300% 1.5). Despite low participation, unemployment rates Annual growth in receipts 250% remain high and have only slightly declined to 22.3 200% percent in Q2-2023, compared to 22.6 percent in the 150% 100% previous year. Unemployment remains well above 50% pre-pandemic levels and regional averages (Figure 0% 1.6). Women and youth (ages 15-24) continue to be -50% the most affected, with 30.9 and 47 percent -100% unemployment rates, respectively. 2017 2018 2019 2020 2021 2022 H1-2022 H1-2023 Figure 1. 5 All labor market indicators remain unfavorable Travel receipts Business Personal Percent of labor force, percent of working age Health Education population, percent of labor force. Source: CBJ and WB staff calculations 40 Figure 1. 4 Travel arrivals are equally distributed by region/country of origin 30 Thousands 2700 20 2200 Umemployment 10 1700 Labor force participation Employment 1200 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 700 200 2018 2019 2020 2021 2022 2023 -300 Source: DoS Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2-2023 Figure 1. 6 Unemployment is still high, particularly among women Jordanian Arab Non-Arab Total Percent of labor force 35 Source: CBJ and WB staff calculations Generating employment remains a major 30 challenge, as economic growth has not 25 translated into significant gains in labor market outcomes. Labor force participation remains on a 20 downward trend, reaching 33.0 percent in Q2-2023, with female labor force participation (FLFP) rates 15 still among the lowest in the world and declining further to 13.8 percent in Q2-2023 (the “In Focus” 10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 presents a deep dive into women’s economic empowerment). Labor force participation for men 2018 2019 2020 2021 2022 2023 (53.0 percent) is also low by global and regional Total Male Female standards, which points to the need to increase labor Source: DoS and WB staff calculations force participation for both men and women, and to 13 Jordan Economic Monitor Fall 2023 The poverty rate stands at 15.7 percent based on sector’s employment for three consecutive years. 2017-18 data. While no new official poverty rate has Figure 1.7 captures the relationship between sectors’ been released since 2019, it is likely that the rising growth, their employment weight and growth. It cost of living has adversely affected the poorest and shows that over the past five years, sectors’ faster most vulnerable households, especially as they GDP growth does not necessarily reflect on spend a greater share of their income on daily employment growth, even for those sectors that are expenses and may have to borrow or cut back. already absorbing a large number of labor. This is Economic growth has also been insufficient to the case of Wholesale & Retail Trade as well as in create enough jobs, particularly for the growing Finance & Insurance, which have both seen a numbers of unemployed youth. Targeted cash contraction in employment. Positive employment transfers for Jordanians continue to provide growth occurred only in Tourism, and to a lesser important buffers, with the coverage of the National extent in Manufacturing and Agriculture but the Aid Fund’s monthly support increasing from 97,000 latter is a small employing sector. All other private households to 220,000 between 2018 and 2023. sector dominated sectors (represented by the blue However, recent decreases in humanitarian bubbles), including Transportation, ICT, assistance (including to Syrian refugees) could have Construction, and Real Estate, have witnessed adverse welfare consequences.4 contractions in employment, in addition to weaker- than-average economic activity. On the other hand, Promising high-productivity sectors are Public Administration & Defense and the social experiencing faster employment growth, but sectors – which are dominated by the public sector their share in total employment remains low. (yellow bubbles) - remain the two largest sectors The information and communication sector was the (absorbing 45 percent of employment) and have not second fastest-growing employer in 2022 (16 seen any marked contraction in employment in the percent), although its share in total employment is past five years. As fiscal pressures and an intended still very limited (around 2 percent). Employment shift towards private sector-led growth continue to growth was the highest in accommodation and constrain public sector’s hiring, job creation needs restaurants (29 percent growth), reflecting the to come from the private sector. recovery in tourism after a contraction in the Figure 1. 7 High-productivity sectors are growing faster, but their employment share remains modest Percentage growth in 2022/ share in 2022 8.0 Note: Bubble size Average growth 2% denotes share in total Employment Growth 6.0 Tourism employment over the (5-year average) 4.0 past five years; yellow Manufacturing Agriculture color denotes public- 2.0 Trade sector dominated jobs. 0.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 -2.0 Electricity Finance & Ins. -4.0 Public admin. & Construction Transportation & Defense Mining ICT Admin Services, -6.0 Health and Edu -8.0 Real Estate Source: DOS and WB staff calculations GDP growth (5-year average) 4 In July 2023, The World Food Program had to reduce needed USD 161.35 million) in 2023 needed to continue the transfer value by one-third due to a funding shortfall. providing services for vulnerable children and their In October, UNICEF Jordan announced it is facing a 57 families in Jordan. percent funding gap of USD 92.5 million (out of the 14 Jordan Economic Monitor Fall 2023 2. Fiscal and Debt Developments Figure 1. 8 CG fiscal consolidation on track, supported by enhanced revenues and lower subsidy Jordan’s central government fiscal balance is spending sustaining its consolidation path, supporting slower Percent of GDP debt accumulation yet debt levels remain a concern. Total revenues and grants Fiscal consolidation continued in 2022 and 7M- Total expenditures (incl. use of cash) 40 Overall balance 2023, supported by revenue-enhancing reforms and slightly lower public expenditure. The 30 overall deficit of the Central Government (CG) 20 reached 5.6 percent in 2022 and narrowed by 0.4 percentage points of projected GDP5 in 7M-2023, 10 compared to the same period of the previous year 0 (Figure 1.8). The primary balance recorded a surplus -10 of 0.3 percent of GDP in 7M-2023, compared with 2018 2019 2020 2021 2022 7M-2022 7M-2023 a deficit of 0.4 percent of GDP in the same period of the previous year. Lower current primary expenditure and higher domestic revenue supported Source: MoF and WB staff calculations. the better fiscal outcome and more than Figure 1. 9 Revenues increase was driven by both compensated for the increase in capital expenditure tax and non-tax revenues, despite lower grants and interest payments as well as lower grants which Percent of GDP declined by 0.2 percentage point of GDP. This 30 brought the overall CG fiscal deficit to 2.5 percent of full-year GDP in 7M-2023, compared to 2.9 percent in 7M-2022. 20 Total revenues increased in 2022 and continued to improve in H1-2023, driven by higher income 10 tax and non-tax revenues, despite the decline in foreign grants. Total revenues (including grants) reached 25.8 percent of GDP in 2022, up from 24.7 0 2018 2019 2020 2021 2022 7M-2022 7M-2023 percent of GDP in 2021 (Figure 1.9). Tax revenues increased by 0.4 percentage points of GDP in 2022, relative to the previous year. Higher income and Tax revenues Non tax revenues Grants profit tax revenue, mainly from companies and projects offset the decline in sales tax revenue. Non- Source: MoF and World Bank staff calculations. tax revenue increased by 0.8 percentage points of GDP in 2022 owing to higher property income and The revenue increase continued in the first seven miscellaneous items. Foreign grants stabilized months of 2023 (7M-2023), increasing by 0.3 around 2.3 percent of GDP in 2022, in line with the percentage points of GDP (including grants). This previous year (2.4 percent). was also due to higher income tax and non-tax revenues, which offset lower sales tax revenue (in percent of GDP)., foreign grants declined to 0.1 percent of GDP in 7M-2023, down from 0.2 percent of GDP in 7M-2022. 5Based on the projected GDP for 2023 presented in the outlook section. 15 Jordan Economic Monitor Fall 2023 The phasing out of fuel subsidies helped Figure 1. 10 Increased capital expenditure and contain public spending in 2023, which had interest payments were offset by lower subsidies spending markedly increased in 2022. Spending had Change in expenditure, in percent of GDP increased to 31.5 percent of GDP (up from 30.9 percent of GDP in 2021), driven by the re- 3.0 introduction of food and fuel subsidies to mitigate 2.0 the impact of external shocks. Fuel subsidies were subsequently phased out in 2023, while cutbacks in 1.0 wheat subsidies (of JD 60 million) were 0.0 compensated by the introduction of a subsidy to -1.0 strategic food commodities (of JD 277 million) in the 2023 budget. These developments led to 0.6 -2.0 2019 2020 2021 2022 7M-2022 7M-2023 percentage points of GDP decline in subsidies in 7M-2023. On the other hand, global financial Capital expenditure conditions tightening contributed to the increase of Transfers interest payments by 0.3 percentage points of GDP. Goods Subsidies Defense and Security Additionally, capital expenditure, which traditionally Interest payments Purchases of Goods & Services suffers from low budget execution,6 increased by 0.2 Compensation of employees percentage points of GDP in 7M-2023 compared to Source: MoF and World Bank staff calculations. the previous year, reaching 1.7 percent of GDP. Overall, total spending marked a slight decline in At the end of July 2023, gross government and 7M-2023 of 0.1 ppts of GDP compared to the same guaranteed debt stock increased to JD40.1 period of the previous year (Figure 1.10). billion. This compares to JD38.5 billion at the end of December 2022, with the increase mainly Improved budget sector fiscal performance attributed to higher foreign currency debt (of JD1.4 supported slower debt accumulation, but billion), including from the issuance of USD1.25 central government debt levels remain a billion (JD 0.9 billion) Eurobonds in April 2023.7 As concern as pressures from the wider public for the stock of domestic currency government and sector persist. The gross government and guaranteed debt, it increased only slightly by JD 0.2 guaranteed debt (which covers the budget sector billion, with . the increase in guaranteed debt being and other public entities including NEPCO and nearly offset by a decline in government debt, WAJ) increased to 111.4 percent of GDP in 2022, reflecting the decrease in the stock of treasury bills up from 108.8 percent of GDP in the previous year. and bonds held by banks in favor of the debt held Of the total increase, 72 percent was driven by the by the SSIF. Excluding SSIF holdings, gross budget sector deficit, followed by NEPCO (11 government and guaranteed debt increased by JD0.9 percent) and WAJ and water distribution companies billion to record JD31.5 billion at the end of July (9 percent), in addition to others (9 percent). The 2023. Box 1 takes a deep dive into debt general government debt and guaranteed debt (i.e. developments over the past 25 years. after netting out the SSIF holdings of government debt) reached 88.8 percent of GDP in 2022, up from 87.5 percent of GDP in the previous year. 6 Capital expenditure stood at 3.4 percent of GDP in 7 The GoJ issued a 6-year Eurobonds at 7.5 percent. The 2022, nearly unchanged relative to 3.5 in 2021. While it is USD 1.25 billion is nearly double the amount it initially only slightly below to the pre-COVID average of 3.7 intended to issue ($750 million). percent of GDP (2013-19), the actual/realized capital expenditure remained under-executed by 20 percent on average between 2018-2022 (excl. 2020). 16 Jordan Economic Monitor Fall 2023 Box 1. Evolution of Jordan’s gross government and guaranteed debt This box analyzes the evolution of public debt in Jordan. When measuring Jordan’s debt, it is useful to clarify the different concepts and definitions: (1) The Budget Sector is the narrowest definition, and covers the government debt. (2) The Central Government (CG) debt and guaranteed debt covers: (i) the budget sector debt; and (ii) the guaranteed debt of 57 government units, including NEPCO and WAJ. (3) The General Government (GG) debt consolidates the above definition (2) with the Social Security Corporation (SSC) holdings of government debt. The SSC is currently running an annual surplus and therefore purchases government bonds through its investment agency, the Social Security Investment Fund (SSIF).8 Over the past 25 years, Jordan’s gross Figure B. 1 Gross Government and Guaranteed government and guaranteed debt (as a Gross Debt percent of GDP) has followed a V-shaped Percent of GDP trajectory. Between 1998-2008, the CG gross 120 government and guaranteed debt ratio declined 100 from 109.8 percent of GDP to around 58.4 percent (Figure B.1). The improvement in the 80 debt ratio was mainly supported by a decline in 60 the foreign currency debt ratio from 89.3 40 percent of GDP to 22.6 percent, with the debt stock level remaining stable at an average of 20 USD 7.0 billion (Figure B.2) while economic 0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 growth accelerated. This decline in the foreign currency debt ratio had more than offset the Domestic currency Foreign currency steady increase in the domestic currency debt. Gross debt Figure B. 2 Foreign Currency Debt Figure B. 3 Debt accumulation and NGDP Billion US Dollar Growth rate 27 25 Differential (+ve=debt growth > GDP growth) 22 Debt Growth rate 20 Nom. GDP growth 17 15 12 10 7 5 2 0 -3 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 8 Therefore, the GG debt (net of SSIF holdings) is lower than in the CG definition. If the SSC were to run a deficit, the GG debt would become larger than CG debt. 17 Jordan Economic Monitor Fall 2023 Since 2008 and with multiple external shocks, the improving trend reversed. Several shocks, together with some policy choices aimed at mitigating their impact on the population, have successively induced debt accumulation (Figure B.2 and Figure B.3). For instance, following the disruption of favorably priced natural gas supplies from Egypt in 2011, the GoJ opted for limiting the extent to which higher gas prices reflect on the electricity tariffs. While this decision helped spare the bulk of the population from large tariff increases, it led to a substantial accumulation of debt in the energy sector/NEPCO. This had adverse consequences for public debt, with the CG government and guaranteed debt ratio reaching 111.4 percent of GDP in 2022. During that period, the guaranteed debt, which includes NEPCO and WAJ debt, rose sharply from 3.3 percent of GDP in 2008 to around 13.1 percent of GDP in 2012 before leveling off to an average of 10.6 percent of GDP in the subsequent years (Figure B.6). To help contain debt accumulation, the GoJ carried out a fiscal consolidation program - notably through fuel subsidies elimination and revenue mobilization measures - that led to a cumulative decline of the budget sector primary fiscal deficit (excluding grants) by around 6.5 percentage points of GDP between 2012 and 2022 After 2008, there has been a shift in the creditor structure amid extending debt maturity. While Jordan’s relatively large and liquid banking sector remains the primary holder of public domestic debt (Figure B.8), its share has gradually declined since 2008, driven by lower share of CBJ’s claims on central government (Figure B.9). Claims on central government (as percent of commercial banks domestic assets) increased from 12.4 percent to around 24 percent between 2008 and 2014 and stabilized around 20 percent thereafter. On the other hand, the share of domestic currency debt held by non-banks (including SSIF) has more than doubled to around 43.5 percent in 2022. For the foreign currency government and guaranteed debt, the share of bilateral loans has declined significantly from 58.8 percent to only 17.8 percent between 2008 and 2022, in favor of government bonds which share rose significantly in 2022 to around 40.8 percent of the total outstanding foreign currency debt stock (Figure B.11). Meanwhile, multilateral loans still account for over one-third of the total foreign currency debt (Figure B.12). The changes in the creditor structure also coincides with extending the weighted average maturity of the debt (Figure B.10). For domestic currency debt, the weighted average maturity increased from around 2 years in 2010-2015 to around 4 years in 2022. Meanwhile, the weighted average maturity of foreign currency debt also increased from around 6 years in 2008 to around 9 years in 2022. Figure B. 4 Change in Gross Central Government and Guaranteed Gross Debt and its Drivers Percent of GDP 12 9 6 3 0 -3 -6 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Real effective interest rate Real GDP growth Exchange rate depreciation Primary deficit Residual Guaranteed debt Change in government and guaranteed gross debt (% of GDP Note: Exchange rate depreciation reflects the contribution from US dollar nominal effective exchange rate changes against major currencies weighted by the share of Jordanian foreign currency debt that is not denominated in US dollar or other currencies pegged to the US dollar. 18 Jordan Economic Monitor Fall 2023 Figure B. 5 Central Government Gross Debt Figure B. 6 Guaranteed Gross Debt Percent of GDP Percent of GDP Domestic currency Foreign currency Domestic currency Foreign currency 120 14 12 10.3 100 9.8 10 9.8 80 8 60 6 40 4 20 2 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Figure B. 7 Domestic Currency Debt Figure B. 8 Holders of Domestic Currency Debt Percent of GDP Percent of total domestic currency debt Central Government Guaranteed Held by banking sector Held by non-banks 60 100 50 80 40 60 30 20 40 10 20 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Figure B. 9 Claims on Central Government Figure B. 10 Weighted Average Debt Maturity Percent of banking sector total domestic assets Year Domestic currency debt Commercial Banks CBJ Total 100 Foreign currency debt 10 80 8 60 6 40 4 20 2 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 19 Jordan Economic Monitor Fall 2023 Figure B. 11 Holders of Foreign Currency Debt Figure B. 12 Breakdown of Multilateral creditors Percent of total foreign currency debt Share of total Others Bilateral loans Multilateral loans Islamic Development Bank Government Bonds Others European Investment Bank 100 Arab Monetary Fund & AFSED IMF IBRD & IDA 80 100 80 60 60 40 40 20 20 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 The Social Security Investment Fund (SSIF) has become one of the main non-bank holders of Jordan’s government and guaranteed debt, mainly domestic currency debt. The share of SSIF holdings of public debt has gradually increased to around 20.0 percent of the total gross government and guaranteed debt, which is equivalent to around 22.6 percent of GDP in 2022 (Figure B.13). While the pace at which the SSIF has been buying government and guaranteed debt has declined significantly between 2017 and 2020, it more than doubled after the COVID-19 pandemic to reach around 30.1 percent of newly issued government debt in 2022 (Figure B.14). As of 2021 (latest available), treasury bonds represented around 54.4 percent of total SSIF assets, up from 46.3 percent in 2016 (Figure B.15). The continuous absorption of large amount of government debt going forward may limit the ability to invest in other asset classes and sectors, challenging the SSIF objective of sustaining a diversified investment portfolio.9 Additionally, the SSC’s current financial surplus is projected to turn into a deficit in about ten years or twenty years if return on investment are taken into consideration,10 which will limit its ability to absorbing more government debt and eventually become a net seller of government debt. Net of SSIF debt holdings, the government and guaranteed debt recorded around 88.8 percent of GDP in 2022, up from 75.7 percent of GDP in 2017 (Figure B.16). The elevated debt level has resulted in a gradual increase in debt service payments. Interest payments increased from 7.9 percent of total revenue in 2008, and peaked in 2020 before slightly leveling off to around 16.6 percent in 2022 (Figure B.17). At 15.2 percent of total revenue, Jordan’s average interest payments is relatively elevated compared to peers (Figure B.18). Its foreign currency component peaked during the COVID-19 pandemic (2020) at around 28.1 percent of total exports, before leveling off to 19.4 percent in 2022. It remains however relatively elevated compared to peers (Figure B.19), represents almost 23 percent of CBJ’s gross foreign reserves in 2022. More than half (56.4 percent of CBJ’s gross foreign reserves) is of short-term in 2022, down from its peak of 68.2 in 2018 (Figure B.20). While foreign currency debt service payments in 2023 is projected to be close to its 2022 levels, other significant payments3 are projected between 2025 and 2027.11 9 SSIF, the Pillars of SSIF Investment Policy. 10 World Bank (2021) 11 MoF quarterly debt report Q4-2022. 20 Jordan Economic Monitor Fall 2023 Figure B. 13 SSIF Holdings of Government and Figure B. 14 Share of SSIF purchases of new Guaranteed Gross Debt debt Percent of GDP In percent of the change in total debt Domestic currency guaranteed debt 70 25 Foreign currency budget debt 60 Domestic currency budget debt 20 50 40 15 30 10 20 5 10 0 0 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 Figure B. 15 Stock of Treasury bonds held by SSIF Figure B. 16 Government and Guaranteed Debt, Share of total SSIF assets net of SSIF Holdings, Percent of GDP 60 Guaranteed debt Domestic currency budget debt Foreign currency budget debt 50 Gross debt 100 40 80 30 60 20 40 10 20 0 0 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 Figure B. 17 Interest Payments Figure B. 18 Average Debt Interest Payments Percent of tax and total fiscal revenues 2017-2021, Percent of fiscal revenues Interest payment (in % of tax revenue) 20 Interest payment (in % of total revenue) 15 Effective interest rate on gov debt (RHS, in %) 30 6 10 25 5 20 4 15 0 Rwanda Upper middle income Albania Senegal Middle income Morocco Lower middle income Namibia Jordan Costa Rica Bangladesh Jamaica 10 2 5 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 21 Jordan Economic Monitor Fall 2023 Figure B. 19 Average Debt Service 2017-2021, Figure B. 20 Foreign Currency Debt and Debt International Comparison Service Percent of exports receipts and primary income Percent of CBJ’s Gross Foreign Reserves 80 40 70 30 60 50 20 40 10 30 0 20 10 Bangladesh Benin Morocco Costa Rica Lower middle income Middle income Upper middle income Albania Tunisia Rwanda Jordan Egypt Senegal Jamaica 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Short-term foreign currency debt Foreign currency debt service Note: Selected peer countries: regional peers and countries with similar credit rating All data sources are from Dos, CBJ, MoF and WB staff calculations. 3. External Sector Developments percent of full-year GDP during H1-2023, compared to 6.0 percent in H1-2022, helped by a 65 percent Easing global commodity prices and higher travel increase in travel receipts. Overall, the services balance receipts in 2023 are further supporting the external reached 3.4 percent of expected GDP compared to 1.1 accounts. percent during the same period in 2022. On the other hand, workers’ remittances witnessed a slight Despite the widening of the trade deficit, the contraction of 0.4 percent, after growing by 1.5 recovery in travel receipts helped reduce the percent in H1-2022. Both the primary and secondary current account deficit (CAD) in 2022. The CAD income accounts have slightly deteriorated compared narrowed to 7.7 percent of GDP in 2022, compared to to H1-2022. 8.0 percent in 2021 (Figure 1.11). The significant recovery continued throughout 2022, outpacing the The trade deficit improved on the back of a wider trade deficit (23.7 percent of GDP) and a contraction in imports. The trade deficit narrowed deterioration in Jordan’s income accounts. Meanwhile, to 9.6 percent of GDP in H1-2023, compared to 11.2 the capital and financial account surplus also declined percent in 2022. Exports declined to 12.4 percent of substantially, as the pickup in foreign direct investment GDP but were outpaced by the contraction in imports (FDI) to 2.6 percent of GDP was not enough to to 22.0 percent of GDP (down from 24.2 in the counter the outflow of portfolio investment and the previous year). The decline in imports was driven by a slowdown in other investments. As a result, the favorable price effect despite higher energy and non- balance of payments (BoP) registered a deficit of 1.5 energy imports volume (Figure 1.12). percent of GDP during 2022, from a surplus of 5.1 Chemicals and phosphate remain Jordan’s largest percent in 2021. export commodities, accounting for close to half The first half of 2023 saw a continued (46 percent) of total exports in H1-2023, followed improvement in the current account deficit, by textiles and clothing (16 percent). Stones and largely driven by further increases in travel precious metals as well as food and live animals are the receipts and a lower trade deficit, despite the main positive contributors to export growth during setback in remittances. The CAD narrowed to 3.3 this period. Meanwhile the prices of Jordan's key 22 Jordan Economic Monitor Fall 2023 exported commodities (e.g., phosphate and potash) compared to 2.8 percent in H1-2022, driven by have shown mixed directions. Phosphate has remained significant portfolio investment inflow attributed to well above its levels from before the Russian invasion the USD1.25 billion Eurobond issuance in April 2023. of Ukraine, while potash prices remain well below the At the same time FDI stabilized around 1.3 percent of pre-war levels.12 GDP and other investments declined steeply to 0.2 Figure 1. 11 The CAD improved in H1-2023 driven by percent (from 2.6 percent the year before). The overall services balance and a shrinking trade deficit BOP balance hence registered a deficit of 0.4 percent Current Account Developments, Percent of GDP of GDP in H1-2023 compared to 2.6 percent of GDP 40 in H1-2022. As a result, gross foreign reserves witnessed a dip in the beginning of 2023, before 20 increasing again (by around USD200 million) to reach USD18.4 billion as of August 2023 (Figure 1.14). 0 Figure 1. 13 Portfolio investment have increased in 2023 while FDI has stabilized -20 Percent of GDP 10.0 -40 2018 2019 2020 2021 2022 H1-2021 H1-2022 H1-2023 5.0 Public grants Trade Balance 0.0 Travel receipts Workers Remittances Services payments CAB -5.0 2018 2019 2020 2021 2022 H1-2021 H1-2022 H1-2023 Source: CBJ and WB staff calculations Figure 1. 12 H1-2023 saw a contraction in both energy FDI Portfolio Investment and non-energy imports Other Investment Financial Account Balance Cumulative, growth, in percentage points Source: CBJ, WB staff calculations 50 Energy Non-Energy Total Figure 1. 14 Reserves stabilized around end-2022 level 40 CBJ Gross Foreign Reserves, USD million 30 6.6 19,000 6.5 18,500 20 6.4 6.3 18,000 10 6.2 17,500 6.1 17,000 0 6.0 5.9 16,500 -10 5.8 16,000 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Source: DoS and WB staff calculations In months of imports, LHS Gross foreign reserves (RHS) The capital and financial account surplus Notes: Reserves of Gold and Foreign Currencies. Gross usable increased in H1-2023, propelled by significant reserves include gold and foreign currencies and exclude forward inflow of portfolio investment. The surplus contracts. In months of next year's imports of Goods and Services. increased to 3.7 percent of expected full-year GDP, Sources: CBJ and WB staff estimates 12 World Bank Commodity Markets Outlook, October 2023 23 Jordan Economic Monitor Fall 2023 4. Monetary Policy and Inflation Figure 1. 15 Annual headline inflation rate decelerated significantly in 2023 Percent Monetary policy tightening supports decelerating 7 annual inflation rate and money growth. 6 Inflation decelerated significantly in 2023 from its 5 peak reached in 2022. The annual headline inflation 4 rate declined to 1.4 percent in October 2023, down 3 from its peak of 5.4 percent in September 2022 (Figure 2 1.15). The deceleration has been supported by a 1 favorable base effect and muted monthly inflation 0 (Figure 1.16). The monthly headline inflation rate -1 Feb-17 Jul-17 Dec-17 May-18 Oct-18 Mar-19 Aug-19 Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 Feb-22 Jul-22 Dec-22 May-23 Oct-23 recorded an average of 0.2 percent in Jan-Oct. 2023, compared with an average of 0.5 percent during the same period in 2022, and an overall historical average of 0.2 percent. This was supported by the negative Figure 1. 16 The deceleration has been supported by contribution from fuel and transportation prices and favorable base effects and muted monthly inflation Change in annual headline inflation rate, percentage points the contained effect from food and core items, reflecting the gradual dissipation of the supply shocks 5 Base effect, in p.p. associated with the Russian war on Ukraine (Figure 3 Monthly dynamics, in p.p., 1.17). The contained inflation reflects the ongoing 1 monetary policy tightening, with real interest rates remaining positive and high. The Central -1 Bank of Jordan (CBJ) raised its key policy rate by 100 -3 basis points in 2023, and a total of 525 basis points since the beginning of this tightening cycle in March -5 2022. The CBJ overnight deposit rate and overnight Mar 22- Sep 22 Oct 22- Oct 23 repo rate recorded 7.25 and 8.25 percent, respectively in September 2023, the highest since 2006/07. The Figure 1. 17 Muted monthly inflation was supported weighted average lending and savings interest rates in by negative contribution from fuel items the banking sector also increased to the highest levels Change in monthly headline inflation rate, ppts in years. Real interest rates13 continued to increase 5 Food Inflation since Q3 2022 supported by higher nominal rates and 4 lower inflation (Figure 1.18). Rents 3 The real effective exchange rate depreciated on an Core items, excl. rents annual basis for the fifth consecutive month in 2 September 2023 (Figure 1.19), the depreciation which marks a gain competitiveness, was supported by a 1 lower rate of inflation in Jordan compared to main 0 trading partners and the fact that the US dollar appreciation against its main trading partners has lost -1 Mar 22- Sep 22 Oct 22- Oct 23 some steam as the Federal Reserve approaches the end of its tightening cycle. Source: DoS and WB staff calculations. Nominal interest rates adjusted for inflation using a 3- 13 weights (50-50) assigned to backward- and forward- month average of annual headline inflation with equal looking components. 24 Jordan Economic Monitor Fall 2023 Figure 1. 18 Real interest rates continued to increase since Q2 2022, Percent In tandem with the policy rate hikes and the Interbank rate Overdrafts ongoing fiscal consolidation, liquidity growth 10 Loans and Advances Time Deposit Rate continues to decelerate. Broad money (M2) annual growth rate slowed down to 2.2 percent in September 5 2023 (the lowest level since 2019), down from its peak of 7.7 percent in June 2022 (Figure 1.20). This 0 deceleration has been mainly attributed to declining contribution from the net domestic assets, given the -5 slowdown in lending to both the private and public sectors, in addition to a decline in other unclassified Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 assets. On the other hand, the contribution of net Source: CBJ, Haver analytics and WB staff calculations foreign assets turned positive since June 2023 after a year of contributing negatively, reflecting the Figure 1. 19 The REER depreciated on annual terms improvement in Jordan’s external balances (Figure for the fifth consecutive month 1.21). Contribution to annual change, p.p. Meanwhile, CBJ’s balance sheet continued to JD NEER (in p.p.) 20 contract down from its level in December 2021. In Inflation differential (in p.p.) 2022, CBJ’s balance sheet contraction was mainly 15 JD REER (YoY, in %, +ve= appreciation) attributed to a decline in the foreign assets, in 10 particular CBJ’s foreign cash balances and deposits 5 given the repercussions of the Russian invasion of 0 Ukraine. In 2023, the decline was mainly attributed to a decline in the domestic assets, in particular CBJ’s -5 repos balances which historically had witnessed -10 notable increases during crisis time (e.g., 2012 and 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 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 Sep-23 2020). Figure 1. 21 NFA contribution to broad money annual Source: Brugel and WB staff calculations. growth rate turned positive Figure 1. 20 Broad money annual growth rate slowed Percentage points down to the slowest pace since 2019 7 NFA, Banks Percent/percentage points NFA, central Bank 5 NFA 15 NFA NDA Broad Money 3 10 1 -1 5 -3 0 -5 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 -5 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 Source: CBJ and WB staff calculations Source: CBJ and WB staff calculations 25 Jordan Economic Monitor Fall 2023 B. Outlook and Risks Queen Alia Airport, Amman, Jordan © Julius Bramanto Growth is projected to accelerate to 2.6 percent to 2018 (15.7 percent in July 2023, the World Bank in 2023, driven by the services sector and a reclassified Jordan as a lower middle-income rebound in agriculture. Several service sectors are country based on the previous year’s GNI per expected to keep momentum including wholesale capita estimates. This year’s downward revision is and retail trade, transport, storage and mainly due to an upward revision (+9.6 percent) to communications and restaurants and hotels. The Jordan’s population published in the World industrial sector is also expected to keep its robust Population Prospects 2022. While the recovery of contribution to growth, although at a slower than services is expected to support wage incomes, large in 2022 when growth was the highest since 2014. socioeconomic vulnerabilities persist. Limited Slower export growth is also expected to weigh on private sector job creation, segmented labor the industrial sector’s growth, mainly due to base markets, high informality, and low labor effects. Real GDP growth is expected to reach 2.6 productivity continue to suppress households’ real percent in 2023, primarily propelled by the services income growth. Cuts in cash transfers to refugees sector. A subsequent deceleration to 2.5 percent is due to declining foreign assistance are likely to have anticipated in 2024, followed by a resurgence to 2.6 an adverse impact on poverty, food security, and percent thereafter. households’ indebtedness. Several socioeconomic developments Inflation is anticipated to remain contained, continue to suppress households’ real income reflecting the ongoing monetary policy growth. The latest poverty rates available date back tightening and relatively stable commodity 26 Jordan Economic Monitor Fall 2023 prices in 2023. Annual headline inflation is early 2023. The current account deficit (incl. expected to stabilize around 2.4 percent in 2023, grants) is expected to narrow to 6.6 percent of down from 4.2 percent in the previous year, driven GDP in 2023, compared to 7.7 percent in 2022, by a favorable base effect and muted core inflation supported by the improvement in the trade balance and helped by the easing global commodity prices. and despite slower growth in remittances. Lower However, renewed concerns about global oil global commodity prices are expected to lower the supply - following the announced voluntary cuts in import bill (including both energy and non-energy oil production by Saudi Arabia and Russia, and the imports) to 47.8 percent of GDP compared to 59.9 potential for renewed regional conflict in the percent in 2022. Meanwhile, exports are expected Middle East - could pose an upside risk to oil prices to stabilize at 26.4 percent of GDP, as the and, hence, the inflation and fiscal outlooks. On the expansion in exports of stones and food and live other hand, the recent decision of the USA to lift animals is met with a decline in potash global prices sanctions on Venezuela, could alleviate some of from its peak in 2022. The services account is also these concerns and mitigate the impact on global expected to witness an improvement, owing to a oil prices. pickup in tourism and higher travel receipts in the first three quarters of 2023. FDI is expected to slow Central government fiscal balance down to 2.3 percent of GDP in 2023 compared to consolidation will remain supported by the 2.6 percent in 2022, supported by high retained decline in subsidies and the growing domestic earnings in the first half of the year. revenues. The overall fiscal deficit is expected to narrow further to 5.2 percent of GDP in 2023, The eruption of the conflict in the Middle East from 5.6 percent in the previous year. On the and the concerns over its prolongation or revenue side, tax revenues are expected to continue escalation in the region carry important risks growing to reach 17.8 percent of GDP in 2023, up for the region and for Jordan’s economy. Rising from 17.5 percent of GDP in the previous year, geopolitical tensions take a toll on risk sentiment reflecting the implementation of tax administrative and conflicts can affect economies through reforms. These will offset the impact of lower different channels, even when they are not directly contribution from non-tax revenues and grants. On involved. These include disruptions in trade flows, the other hand, total expenditure is expected to tourism markets, volatility in energy markets and decline to 31.1 percent of GDP in 2023, down from the subsequent impact on consumption and the 31.5 percent in the previous year. This decline is cost of production. In Jordan, tourism activity is at mainly driven by lower subsidies and the high risk of being impacted, especially in the case containment of public wage bill growth, which will of a sharper escalation of the conflict. Even in the offset the impact of higher interest payments and case of a contained conflict, neighboring countries capital expenditures. Public debt will however may still be perceived as a risky destination. This remain elevated, as the gross government and could have implications on Jordan’s external guaranteed debt is expected to increase to 113 accounts, given that the significant recovery of percent of GDP in 2023. Given the increasing SSIF travel receipts since 2021 was key in supporting the purchases of new debt, the debt ratio (net of SSIF current account. In the scenario of no quick holdings) is projected to inch down to 88.7 percent containment of the conflict, it may trigger marked of GDP in 2023. increases in global oil prices and affect economic activity through lower domestic and foreign The external accounts are expected to witness investment (Box 2). gradual improvement over the medium term, benefitting from easing global commodity prices and the initial recovery of tourism in 27 Jordan Economic Monitor Fall 2023 Box 2. Mapping out the potential impact of the conflict in the Middle East on the Jordanian economy The current conflict in the Middle East led to a substantial loss of lives, a grave humanitarian crisis in Gaza, and significantly heightened geopolitical risks in the region. Depending on the duration and expansion of the conflict, it has the potential for material economic spillovers on the Jordanian economy, notably through its impact on tourism activity in the remainder quarter of 2023, with implications for travel receipts and external accounts.14 A scenario where global oil prices see substantial increases would also reflect on Jordan’s current account and fiscal balances, with possible impact on consumers’ spending and cost of production through higher inflation. a. The conflict risks undermining tourism activity and receipts at the start of a high season. The post-COVID recovery was largely driven by a strong recovery in tourism, with the restaurants and hotels sector growing fast and the number of tourists being the highest since 2019. While the recovery in tourism in 2023 was broad-based across travel categories and countries of origin, single-day tourists had so far witnessed a marked pickup of 76 percent. These are believed to be in most cases visiting Jordan as part of packaged tours that included also Israel; they represent around 17 percent of total arrivals in 2023 and may be the most directly impacted by the conflict. Even without regional escalation,15 Jordan may become perceived as a risky destination for travelers. Early reports from tourism agencies16 point to a 50-75 percent drop in hotel occupancy and reservations in the two months following the start of the conflict, notably in the most famous tourist sites. The aviation industry – which was just recovering from its pandemic-related losses – may also incur higher operating costs as they take longer routes to avoid overflying conflict areas. Additional cost may also materialize in case of higher fuel prices, possibly reflecting on the end consumer price and further affecting tourism. b. Lower tourism may have wider implications for economic activity through backward and forward linkages with other larger sectors. The restaurant and hotels sector, while remaining a small sector in GDP (1.5 percent share), is closely correlated with other important sectors in the Jordanian economy notably wholesale and retail trade, transport, and construction (Figure B.2.1). Additionally, the potential for reduced domestic consumption through behavioral changes could be substantial, as domestic consumption has a large share in GDP. In the worse scenario of regional escalation, disruptions in trade flows can affect value chains and the cost of production, while the increased perception of risks can deter domestic and foreign investment. 14 It is difficult to draw definite conclusions based on past episodes of conflicts in light of other differences in the global and regional context, and given the much larger impact on lives lost, damages and the economy. 15 Tourist numbers had dropped by around 23 percent following the 2014 conflict in Gaza. This may also be reflecting other geopolitical events and some seasonality effect. 16 Jordan Times, 2023 28 Jordan Economic Monitor Fall 2023 Figure B. 21 GDP Growth rate – Tourism and other sectors 12.0% Restaurant And Hotels 12.0% Restaurant And Hotels 12.0% Restaurant And 10.0% Hotels Wholesale And Retail Trade 10.0% 10.0% 8.0% Transport, Storage & Construction 8.0% Communications* 8.0% 6.0% 6.0% 6.0% 4.0% 4.0% 4.0% 2.0% 2.0% 2.0% 0.0% 0.0% 0.0% -2.0% -2.0% -2.0% -4.0% -4.0% -4.0% -6.0% -6.0% -6.0% -8.0% -8.0% -8.0% -10.0% -10.0% -10.0% -12.0% -12.0% -12.0% -14.0% -14.0% -14.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: WB staff based on DoS data. c. Gas imports are governed by long-term Gas Supply Agreements. Jordan sources the majority of its natural gas needs from two sources: Egypt (through a long-term Gas Supply Agreement (GSA) with E- Gas), and the Leviathan gas field in Israel (through a long-term GSA with Chevron). During the first month of the conflict, the Tamar production platform was shut down and Israel’s gas production was cut by close to 50 percent (production resumed in early November). As of October 30, the production from the offshore gas field Leviathan - source of gas supply to Jordan - has not been impacted and no disruptions to the electricity sector gas consumption has been recorded in Jordan. Should the conflict escalate and gas exports to Jordan are reduced, NEPCO has access to import liquified natural gas using the Floating Storage and Regasification Unit (FSRU) facility through the LNG port in Aqaba, possibly at higher cost than that of piped natural gas. d. External accounts are exposed to the conflict ramifications through multiple channels. i. A drop in travel receipts will affect the current Figure B. 22 Potential impact of lower travel account balance, notably in 2023. The significant receipts on CAD recovery of travel receipts since 2021 was key in 0.0% supporting the current account. It is estimated that 2019 2020 2021 2022 2023f 2024f 2025f 2026f in a pessimistic scenario where travel receipts drop -2.0% by 30-50 percent, this could result in a 0.4 - 0.8 percent of GDP deterioration in the current account deficit in 2023, with a gradual recovery to -4.0% the baseline scenario expected by 2025. The capital account may also see lower net inflows as FDI -6.0% -6.6% remains protracted, affected by lower retained -7.1% earnings as investors repatriate profits and -8.0% -7.4% gloomier investors’ sentiment fearing a wider CA Balance (50% drop in travel receipts) regional conflict. CA Balance (30% drop in travel receipts) CA Balance (baseline) Source : WB staff projections 29 Jordan Economic Monitor Fall 2023 ii. Oil prices, while so far contained, can have large implications if they witness sharp increases. Given that the Middle East region accounts for a substantial share of the global energy supply, risks are acute for energy markets, particularly for oil.17. Since the start of the conflict, oil markets have been volatile, but price increases have been relatively mild. Brent prices recorded an average of USD 90.9 per barrel from 9-30 Oct), down from $93.7 per barrel in September (Figure B2. 1). The potential escalation of the conflict could result in higher increases as oil production infrastructure and shipping would come under threat. For Jordan, being a net importer of energy, an increase of oil prices to USD 100-110 per barrel would imply a higher current account deficit to 6.6% - 7.5% of GDP in 2024 (compared to 4.9% in the baseline scenario). In case of protracted conflict and higher prices for longer, this exposure to oil prices may however be partially offset by a possible increase in remittances from oil exporting GCC countries, as well as potential higher budgetary support from the GCC through grants. iii. Non-commodity trade: Jordanian exports to the West Bank and Gaza and Israel represent 2.5 percent and 1.1 percent of total exports in 2022, respectively, while exports to the USA represented 20.9 percent of total exports. In 2022, it is estimated that only one percent of exports to the USA is done through the Qualifying Industrial Zones (QIZ) agreements.18 This small part could be potentially disrupted following the eruption of the conflict, as sourcing inputs sources from the areas of conflict becomes more difficult. It is estimated that a 1 percentage point deceleration in exports growth rate leads to a higher current account deficit by around 0.3-0.5 percentage points of GDP. Figure B. 23 Brent Price Figure B. 24 Destination of Jordanian (USD) (Percent of total exports, 2022) 100 20.9 95 21 90 18 15 85 12 80 9 6 75 2.5 3 1.1 70 0 United States India Saudi Arabia Iraq Indonesia West Bank and Gaza China UAE Egypt Israel Jun 02, 2023 Jun 12, 2023 Jun 22, 2023 Jul 02, 2023 Jul 12, 2023 Jul 22, 2023 Aug 01, 2023 Aug 11, 2023 Aug 21, 2023 Aug 31, 2023 Sep 10, 2023 Sep 20, 2023 Sep 30, 2023 Oct 10, 2023 Oct 20, 2023 Oct 30, 2023 Source: U.S. Energy Information Administration Source: IMF Direction of Trade statistics 17World Bank, 2023. Commodity Markets Outlook, under the shadow of geopolitical risks. 18The QIZ program allows products with a specified amount of Israeli content to enter the United States duty free if manufactured in Jordan, Egypt, or the West Bank and Gaza. Source: Office of the United States Trade Representative, consulted November 5, 2023. https://ustr.gov/countries-regions/europe-middle-east/middle-eastnorth-africa/jordan 30 Jordan Economic Monitor Fall 2023 e. Fiscal implications are complex and may vary depending on the magnitude of the shock, consumers behavioral changes and the government policy reaction. i. Higher oil prices for example can trigger an acceleration in inflation due to the increased costs of production and transportation, as well as a reduction in consumers’ disposable income, thereby affecting tax revenue from corporate income and sales. The latter could also be affected if large changes were to occur in consumers’ behavior following the depressing impact of the conflict on Jordanians. ii. On the expenditure side, higher inflation affects the real value of government expenditures. The GoJ has announced that it does not intend to reintroduce fuel subsidies (similar to its policy choice in 2022 after the Russian invasion of Ukraine), but higher oil prices may translate into higher spending on existing fuel subsidies schemes (for public transport and cooking gas). iii. It is estimated that an increase of 10 percent in oil prices would translate in 0.2 percent increase in fiscal deficit. Hence, if oil price were to reach USD 100-110 per barrel, this would imply a 0.4 percentage points of GDP increase in deficit, in the absence of domestic fuel prices adjustment. Finally, borrowing needs will increase to make up the shortfalls, adding further pressure to debt servicing requirements in a context of high financing cost. a. Sovereign risk and cost of financing: Jordan’s Figure B. 25 Jordan’s EMBI spreads EMBI spreads rose temporarily to record an 550 average of 437.8 bps during 9-30 October, up 500 from 311.8 bps in September (Figure B.21). All neighboring countries have seen upticks in their 450 sovereign risks following the eruption of the 400 conflict. Notwithstanding the temporarily uptick, Jordan still compares favorably to its neighbors 350 and maintains lower spreads (Egypt 1283.6 Iraq 300 605.2; Lebanon 32468.1). Despite the ongoing conflict, Fitch affirmed Jordan at ‘BB-‘, with a 250 01-Mar-23 17-Mar-23 04-Apr-23 20-Apr-23 08-May-23 24-May-23 12-Jun-23 29-Jun-23 18-Jul-23 03-Aug-23 21-Aug-23 07-Sep-23 25-Sep-23 12-Oct-23 30-Oct-23 stable outlook, citing Jordan’s record of maintaining economic and political stability in the face of significant external shocks Source: JP Morgan 31 Jordan Economic Monitor Fall 2023 Table 1. Jordan - Selected Economic Indicators (2019-2025) 2019 2020 2021 2022 2023 2024 2025 Act. Act. Act. Act. Proj. Proj. Proj. Real sector (Percent, unless otherwise specified) Real GDP growth 1.8 -1.1 3.7 2.4 2.6 2.5 2.6 Nominal GDP (JD Billion) 31.6 31.0 32.9 34.5 36.3 38.0 39.9 CPI Inflation (p.a.) 0.8 0.3 1.4 4.2 2.4 2.4 2.4 Government finance (Percent of GDP, unless otherwise specified) Total revenues and grants 24.3 22.7 24.7 25.8 26.0 26.1 26.2 Domestic Revenue 21.8 20.1 22.3 23.5 23.7 23.9 24.2 Tax revenues 14.6 16.0 17.1 17.5 17.8 18.2 18.6 Non-tax revenues 7.2 4.1 5.2 6.0 5.9 5.7 5.6 Foreign Grants 2.5 2.5 2.4 2.3 2.3 2.2 2.0 Total expenditure (incl. use of cash)1/ 29.2 29.8 30.9 31.5 31.1 31.1 31.0 Current 25.0 27.0 27.0 28.1 27.5 27.4 27.2 Capital Expenditure 3.1 2.7 3.5 3.4 3.7 3.7 3.8 CG 'Overall balance (deficit (-), incl. grants) -4.9 -7.1 -6.2 -5.6 -5.2 -5.0 -4.8 CG Primary Balance (deficit (-), incl. grants) -1.3 -3.1 -1.9 -1.5 -0.8 -0.3 0.1 (Percent of GDP, unless otherwise specified) Government and guaranteed gross debt2/ 95.2 106.5 108.8 111.4 113.0 114.2 115.2 Government and guaranteed gross debt, net of SSIF holdings2/ 75.8 85.4 87.5 88.8 88.7 88.5 88.2 SSIF holdings of government debt3/ 19.4 21.1 21.3 22.6 24.2 25.7 26.9 External sector (Percent of GDP, unless otherwise specified) Current Account -1.7 -5.7 -8.0 -7.7 -6.6 -4.9 -4.2 Memorandum Items: NEPCO operating balance (JD million)4/ -3.0 -33.7 -133.4 -249.4 -441.1 -545.2 -601.1 WAJ overall balance (JD million)4/ -266.8 -189.0 -219.8 -182.6 -267.9 -262.0 -257.0 Export FOB (% growth) 7.3 -4.5 17.8 36.6 5.5 5.1 3.8 Import FOB (% growth) -5.5 -10.1 25.0 26.7 0.5 2.2 3.0 Travel Receipts (% growth) 10.2 -75.7 95.8 110.5 7.0 7.0 6.0 Remittances (% growth) 0.9 -9.1 1.0 1.5 1.0 8.1 6.6 Gross usable Foreign Currency Reserves (USD million) 13,511 15,127 17,272 16,432 16,523 16,496 16,490 in months of next year's imports of GNFS 8.8 7.8 6.9 6.5 6.3 6.1 5.9 Source: DOS, CBJ, MoF and World Bank staff projections 1/ Includes use of cash based on IMF Country Report No. 23/49. 2/Government's direct and guaranteed debt (including NEPCO and WAJ debt) and securitization of domestic arrears in 2019 and 2020. 3/ Projected SSIF holdings of public debt as estimated in IMF Country Report No. 23/49. 4/ Source: NEPCO data, latest accessed October 2, 2023. 32 Jordan Economic Monitor Fall 2023 Annex 1. Summary Revisions to Jordan National Accounts In October 2023, the Department of Statistics released a revision of national accounts data, reflecting large changes in Jordan’s nominal and real GDP, as well as their sectoral breakdown for the years 2020-2022 and for Q1-2023. Exports and FDI data were also revised for the year 2022 and for Q1-2023. The combination of these major revisions affected the overall GDP growth rates for the past three years, as well as all major macroeconomic ratios (fiscal, debt, monetary, financial sector, and external accounts) as well as their dynamics, expressed as percentage of GDP. This annex briefly summarizes these revisions and their impact on actual figures as reported by official sources as well as WB staff projections for the medium term. Revisions to Annual Real GDP Growth Figure A. 1 Revisions to Real GDP Growth Figure A. 2 Major Revisions to Real GDP by Sector 7% 8% 8% 8% 8% 3.7% 2.5% 2.4% 2.2% -7% -7.2% -23% -27% -31% Imputed Bank Service Charge Net Taxes On Products Transport,Storage & Domestic Services Of Net Taxes On Products Domestic Services Of Net Taxes On Products Domestic Services Of Communications Wholesale And Retail Trade Wholesale And Retail Trade Households Households Households -1.1% -1.6% 2020 2021 2022 GDP Growth pre-data revisions GDP Growth post-data revisions 2020 2021 2022 Impact on Fiscal Accounts and Debt Figure A. 3 The upward revisions of nominal GDP led to lower deficit-to-GDP ratio Overall fiscal balance Tax revenue (in percent of GDP) (in percent of GDP) Pre-revision Post-revision Pre-revision Post-revision 20 17.57 17.12 17.95 17.51 16.02 15.98 15 10 5 -5.8 -5.6 -6.4 -6.2 -7.1 -7.1 0 2020 2021 2022 2020 2021 2022 33 Jordan Economic Monitor Fall 2023 Figure A. 4 The upward revision of nominal GDP led to lower debt-to-GDP ratios Gross Government and Guaranteed Debt Gross Government and Guaranteed Debt (in percent of GDP) (in percent of GDP, net of SSIF holdings) Pre-revision Post-revision Pre-revision Post-revision 114.2 91.0 89.8 111.7 111.4 88.8 87.5 108.8 106.8 106.5 85.6 85.4 2020 2021 2022 2020 2021 2022 Revisions of External Accounts (exports and FDI) Figure A. 5 The upward revision of nominal GDP led Figure A. 6 Revised FDI and exports figures reflect to lower current account deficit the change in their respective values and in nominal (in percent of GDP) GDP (in percent of GDP) Pre-revision Post-revision 26.1 26.9 26.3 Pre-revision 8.7 8.2 8.0 7.7 Post-BoP revisions only 5.7 5.7 Post-BoP and GDP revisions 2.4 2.7 2.6 2020 2021 2022 FDI in % of GDP Exports as % of GDP 34 Jordan Economic Monitor Fall 2023 Table 2. Summary of Revised Main Macroeconomic Indicators and WB Revised Projections 2019 2020 2021 2022 2023f 2024f 2025f Real GDP Growth (in percent) Pre-revision 1.8 -1.6 2.2 2.5 2.6 2.5 2.5 Post-revision 1.8 -1.1 3.7 2.4 2.6 2.5 2.6 Current Account Deficit (in percent of GDP) Pre-revision -1.7 -5.7 -8.2 -8.7 -7.6 -5.9 -5.1 Post-revision -1.7 -5.7 -8.0 -7.7 -6.6 -4.9 -4.2 Overall fiscal balance (in percent of GDP) Pre-revision -4.9 -7.1 -6.4 -5.8 -5.1 -5 -4.8 Post-revision -4.9 -7.1 -6.2 -5.6 -5.2 -5 -4.8 Government and guaranteed gross debt (in percent of GDP) Pre-revision 95.2 106.8 111.7 114.2 116.2 117.6 118.7 Post-revision 95.2 106.5 108.8 111.4 113.0 114.2 115.2 Government and guaranteed gross debt, net of SSC's holdings (in percent of GDP) Pre-revision 75.8 85.6 89.8 91 91.4 91.2 90.9 Post-revision 75.8 85.4 87.5 88.8 88.7 88.5 88.2 Source: DoS and WB staff calculations 35 Jordan Economic Monitor Fall 2023 C. In Focus Building Success, Breaking Barriers Unlocking the Economic Power of Women in Jordan Arab Muslim girl in school © Zurijeta Women in Jordan hope to see their educational achievements This focus piece follows girls and women in Jordan from birth translating into economic productivity, as women’s labor force through education and into the labor market, going through the participation has been consistently low, both in absolute terms main milestones on their way to economic empowerment. and relative to other countries in the MENA region and Investing in girls' education and skills development is crucial worldwide. Women’s low participation does not have a single for building their human capital, as it paves the way for their cause, but is rather affected by a complex combination of factors seamless integration into the labor market and, ultimately, their encompassing social, economic, regulatory and structural economic empowerment. As they enter the labor market, key elements in addition to personal preference. The first Mashreq constraints may discourage them or make their integration more Gender Facility State of the Women Report identified barriers difficult. This piece focuses on two key areas where policy women face at four critical turning points at which some decide reforms and actions can make a difference in women’s ability to withdraw from the labor market or never enter, including and willingness to work: (i) expanded access to affordable, caregiving responsibilities, public transportation, the legal quality childcare; and (ii) the extension of a well-functioning, environment and the gap between the law on paper and the law comfortable and safe public transport system. in practice, in addition to social norms. 36 Jordan Economic Monitor Fall 2023 Advancing women’s role as economic agents is Figure 2. 1 Gender gaps are prevailing at all stages central to Jordan’s reform agenda and a key Percent driver for stronger, more inclusive and 62 58 sustainable development. Jordan’s economic 53.3 42.9 growth has remained stagnant over the past decade 30.7 38 28 and has been characterized by a persistently low level 19.6 13.7 13 20 9.5 of labor force participation. The education system 0.4 1.6 ensures equal access to boys and girls, and to young Unemployemnt LFP LFP Married LFP Never NEET Employment Management men and women, but women struggle to see their Married Top educational achievements translating into economic productivity. In Jordan, women make up 50.4 percent of the working-age population of nearly 5.5 million people, but less than 14 percent of those women Men Women participate in the labor force, compared with 53 percent of men. Moreover, 38 percent of women, are Source: DoS not in education, employment, nor training (NEET), Figure 2. 2 Women with no or less education are less compared to 28 percent for men. Among those who likely to enter the labor market enter the labor force, 30.7 percent remain Percent unemployed. This translates into less than 10 percent 4% of women actually working, and among those, only 3 41% percent rise to senior positions (Figure 2.1). Women’s total entrepreneurial activity (TEA) is 3.3 percent in 92% 90% 6% 20% Jordan, compared to a global average of 10.2 percent. In 2022, the Global Gender Gap Index Report placed 29% 5% 7% Jordan at 126th out of 146 countries.19 < secondary secondary > secondary Investing in education and healthcare are necessary not economically active (has worked before) to equip women with the human capital they need to not economically active (never worked before) be productive. unemployed (has worked before) unemployed (never worked before) employed Many factors can prevent women from realizing unemployment rate their economic potential, including access to Source: World Bank, HCR (forthcoming) education, health care, finance, technology and legal rights, in addition to social and cultural Jordan does well on providing quality access to factors. A woman’s journey starts from a young age essential reproductive and child health services, where investment in her health and education are key with the antenatal, delivery, and postnatal care to preparing and equipping her with the necessary services delivering good health outcomes for human endowments, through healthcare and mothers and children. A 2016 Royal decree granted education. This is more relevant in Jordan, where free health care services at Ministry of Health (MOH) women with less than a university education rarely facilities for all children under six, and 72 percent of enter the labor force, while those with a university the population is covered by a health insurance education are more likely to enter but have difficulty scheme while MOH facilities offer services for finding suitable employment (Figure 2.2). uninsured Jordanians at discounted prices (20 percent of the cost). As a result, 98 percent of pregnant women receive antenatal care services from a skilled professional and have their babies delivered in a 19The Global Gender Gap Index (by the World Economic (Economic Participation and Opportunity, Educational Forum) annually benchmarks the current state and Attainment, Health and Survival, and Political evolution of gender parity across four key dimensions Empowerment). 37 Jordan Economic Monitor Fall 2023 health facility.20 Around 83 percent of mothers and gaps in ECE outcomes follow students into basic 86 percent of newborn children had a postnatal check primary: around 30 percent of children enrolled in the within the first two days after birth. Almost all first grade were not ready to learn,22 while the early mothers receive key antenatal care services during grade reading assessment (EGRA) shows that reading their visit, although counseling and observation on fluency and reading comprehension is only 46.2 and breastfeeding were the least offered postnatal services 36.9 percent respectively among 2nd and 3rd grade at 66 and 61 percent. There are also no significant Jordanian students.23 differentials across governorates and key socioeconomic factors, suggesting that inequalities in Figure 2. 3 Health outcomes reflect good access to child health outcomes do not stem from differential quality reproductive and child healthcare access to reproductive and child health services. Percent There are also no stark gender inequalities in health outcomes (for example in prevalence of stunting in Girls Boys 11.7 children under five), with girls being even less affected by bad health outcomes in certain aspects 7.9 (prevalence of underweight and overweight) (Figure 7 6.7 2.4). That said, more than a third of women and those in reproductive age suffer some health complications 2.9 2.6 notably anemia, similar than (and sometimes exceeding) the prevailing average in the MENA region and in middle income countries. Prevalence of Prevalence of Prevalence of Jordan is improving on access to early childhood stunting underweight overweight education for both boys and girls (particularly for KG2), but overall access is still low with an Source: World Development Indicators impact on childhood development outcomes and Figure 2. 4 More than a third of women in cascading effects as they progress in the reproductive age suffer some health complications education system. While there are no gender gaps Percent in access, more than a third of children aged 4-5 are Jordan MENA Middle Income not enrolled in the second year of kindergarten education (KG2), and more than two-thirds are not enrolled in KG1 (Figure 2.5).21 Children of mothers with more than a secondary education are much more likely to attend an ECE program (23 percent versus 4-7 percent for children of mothers with less education). Low access to ECE can be partially Prevalence of Prevalence of Prevalence of explained by factors related to the availability and anemia among non- anemia among anemia among affordability of childcare facilities in Jordan (see pregnant women women of pregnant women (ages 15-49) reproductive age below), which has an impact on children’s (ages 15-49) development. While 95 percent of children ages 36- 59 months were on track for their age in terms of Source: World Development Indicators physical development, only 38 percent were on track in the literacy-numeracy domain (Figure 2.8). Early 20 Nearly 100 percent of women have their babies delivered 22 UNICEF 2018 by a skilled health professional. 23 Gajderowicz & Jakubowski, 2022 21 Kindergarten education (KG1 and KG2) for 4–5-year- olds is not currently mandatory in Jordan. 38 Jordan Economic Monitor Fall 2023 Figure 2. 5 No gender gap in access to ECE… registering the lowest unemployment rates (5 Percent percent). 65.4 64.7 Figure 2. 6 …but overall poor access affects literacy and numeracy skills for boys and girls Percent of children ages 36-59 months, 2017-2018 36.8 37.1 Physical 95.1 Learning 86.7 Enrollment rate in Enrollment rate in preschool (KG1+2) preschool (KG2) Soacial Emotional 71.2 Boys Girls Literacy-Numeracy 38.4 Source: Ministry of Education Early Childhood Unlike pre-primary education, overall enrolment Development Score 70.7 rates for primary and to a lesser extent secondary education are high, but both girls and boys keep Source: Jordan Demographic and Health Survey (DHS) dropping out of school as they grow older. While around 95 percent of girls are enrolled in basic Figure 2. 7 Enrolment in education is high but education, 85 percent of the female population aged educational attainment is much lower Percent of female and male population 25+ years 25+ years have finished their primary education, only a third have made it to finish their upper secondary 93.0 education and 22 percent finish their tertiary 85.7 84.2 Male Female education.24 Young women who pursue and finish 77.4 postgraduate studies are very rare (Figure 2.7). Educational attainment is closely related to the skills 33.8 and competencies of a country's population, and 31.2 21.9 23.5 2.8 1.5 0.3 1.1 could be seen as a proxy of both the quantitative and qualitative aspects of the stock of human capital. Completed primary secondary education secondary education Completed tertiary Completed Master's or Completed Doctoral or Completed lower Completed post- education education Around two thirds (61 percent) of young female equivalent equivalent students pass the Tawjihi exam (vs. 46 percent for males in 2022), and only 22 percent complete their tertiary education.25 Very few enroll in TVET programs (10.2 percent in 2022), although men’s enrollment is also low (12.8 percent). Women with Source: World Development Indicators (WDI), building on university education face slightly higher rates of UNESCO Institute for Statistics data, accessed September 19, unemployment (23 percent vs. 20 percent for their 2023. male counterpart). Very few women with less than university education are active in the labor market, 24 Education attainment is calculated by dividing the 25 The Tawjihi public examination – a high profile exam that number of population ages 25 and older who attained or functions as a selection mechanism for access to higher completed certain education level by the total population education. Only half of Jordanians take the exam. of the same age group and multiplying by 100. 39 Jordan Economic Monitor Fall 2023 The circular causality between socioeconomic Women’s participation in the labor market is the most status and human capital status highlights the sustainable protection against poverty and key role of social safety nets in building and vulnerability. protecting girls and young women’s human Despite increased attention given to the capital. For poor and vulnerable households, the women’s economic integration agenda,27 lack of monetary resources and reduced ability to policies aimed at increasing female employment borrow may hinder their ability to provide adequate have had little impact to date. The first Mashreq health and education services to their children. Gender Facility State of the Women Report28 Hence, social safety nets play a major role in identified barriers women face at four critical turning protecting households from shocks that can have points at which some decide to withdraw from the grave consequences for children’s development, for labor market or never enter: “getting ready”, example by pushing them to drop out of school. In “entering & remaining”, “getting married”, “having a Jordan, girls between the age of 7 to 14 spend on child”. Beyond the creation of additional jobs, it average 10 hours per week (this is more than an entire identifies a series of reasons that hinders women’s school day) involved in economic activity and not participation, including caregiving responsibilities, attending school. And while only 2 percent of girls in public transportation, social norms, in addition to the this age bracket are employed, more than 97 percent legal environment.29 are unpaid family workers.26 Those challenges in access to health and education services also cascade Figure 2. 8 Women are much less economically active into adulthood with differential access to labor than men, notably after marriage Not participating in labor force, percent market opportunities and ultimately poverty. To support and expedite girls’ human capital 87.1 accumulation, human capital investments 77.6 should be accompanied with poverty alleviation programs and strategies. Targeted interventions to support poverty alleviation will help poor households 46.6 prioritize access to education and health, including for girls, and make them more resilient against 32.4 potential shocks. In addition to the existing cash transfer program, connecting vulnerable households with social services is also critical to strengthening the social protection system in Jordan, for example by ensuring they have access to redress mechanisms Male Female (e.g., child protection, psychosocial support, gender- Never Married Married based violence). Source: DOS 26Unpaid family workers are defined as people who work 28World Bank, 2020a without pay in a market-oriented establishment operated 29 Box 3 lists important legal reforms recently undertaken by a related person living in the same household. Source: by the GoJ, yet further legislative reforms need to take WDI. place. Additional recommended reforms include those 27 The Engendered Strategy of Jordan’s Economic related to labor law and social security law, for example on Modernization Vision (EMV) represents a government parental leave, equalizing retirement and early retirement commitment to close the gender gaps by enhancing the ages for men and women, and increasing maternity leave participation of women in the marketplace and in in the labor law to 14 weeks instead of the current 10 economic decision-making. weeks, as per ILO standards. 40 Jordan Economic Monitor Fall 2023 Social Norms related to the suitability of women’s Figure 2.9 When jobs are scarce, should men have employment and household roles pose a barrier to more right to get a job than women? Percentage of respondent agreeing with the statement their economic participation, but these can be tackled. 85.8 83.2 82.1 77 80.1 Previous studies suggest that the majority of Jordanians are in favor of women’s work outside the home,30 yet some beliefs and expectations may come in the way of their work. These expectations are closely tied to concerns related to gender roles of married women, interference with caregiving responsibilities, working in mixed-gender environments, or time away from home. Long hours Male Female Up to 29 30-459 50+ and having young children are expected to restrict BY GENDER BY AGE male counterparts’ approval of working women.31 A Source: World Values Survey (2021-2022) survey conducted by the World Bank finds that around 14 percent of surveyed mothers report that their husbands express disapproval towards women Figure 2. 10 Traditional jobs are perceived as ideal occupations for women. who use childcare services in order to work. The view that “when jobs are scarce, men should have more right to a job than women” is broadly held even when Blue collar disaggregating by education, age and gender of Other white collar respondent (Figure 2.9). The type of job also plays a Manager role: as the vast majority of Jordanian youth (over 80 Other professional percent) said teaching or being a health professional Teaching professional were ideal occupations for women, occupations that Health professional are primarily found in the public sector reflecting gender norms regarding employment.32 Military While weak labor demand represents the major 0% 20% 40% 60% 80% constraint for employment for both women and Female Male men, women face additional barriers. These include barriers related the availability and Source: UNICEF (2021) characteristics of care infrastructure and transport, in addition to legal restrictions and informal institutions (also referred to as “norms and beliefs”), each of which intervene at critical life turning points.33 30 Around ninety-six percent of Jordanians believe that it is 32 Survey of Young People in Jordan (SYPJ), UNICEF acceptable for women to work (World Bank. 2018). (2021) 31 World Bank, 2018. 33 World Bank (2020a). 41 Jordan Economic Monitor Fall 2023 The GoJ have adopted many initiatives to tackle Figure 2. 11 Only certain jobs acceptable to Jordanian many of these constraints (Box 3), yet progress youth measured by women’s actual economic participation remains slow. Any policies or 100% Male Female programs targeted to women must address the 80% fundamental reasons why they are not in the labor 60% force and may not even consider employment an option. This analysis focuses and provides granular 40% information on two of the main barriers: (i) childcare 20% availability and affordability, and (ii) the access and 0% use of public transportation. Public sector Admin. Assist. Human resources Customer serv. Driver Telemarketing Industry Bank teller Deliverty Agriculture Waiter Teacher Source: UNICEF (2021) Box 3. Recent and Ongoing GoJ Initiatives in Support of Women’s Economic Participation The Vision and Strategy ▪ 2022: Launching the engendered strategy for the Jordan Economic Modernization Vision 2023- 2033, with a target to double FLFP encompassing - in the executive plan - the legislative agenda, childcare, gender seal, e-shops for women owned businesses, and the “women in manufacturing” initiative. ▪ 2020: Launching the National Strategy for Women 2020-2025, with a strategic objective to facilitate women’s right of access to economic, political and leadership opportunities. Legal Reforms ▪ Labor Law: (i) Adoption and implementation of the Flexible Working Hours Bylaw (2018); Adoption of employer-supported childcare modalities bylaw (2021 and 2023); (ii) Mandating pay equity; (iii) Introducing definition for sexual harassment in the workplace and imposing penalties on violations (2023); and (iv) Removing Article 69 which restricted women from accessing certain sectors and nightshifts; replaced by an article prohibiting the discrimination in access to employment (2023). ▪ Investment Law: incentivizing large investors that employ 50% women with additional benefits (2022). ▪ 2023: Piloting gender-responsive budgeting (GRB) in select ministries (Health, Education, Labor and Parliamentary and Political Affairs). Initial steps included (i) issuing budget circulars with directives on allocating budgets that support the implementation of projects addressing gender gaps; and (ii) assigning focal points at General Budget Department to support (GRB) at line ministries, and gradually building capacities of line ministries to identify gender gaps. 42 Jordan Economic Monitor Fall 2023 Social Protection ▪ Adding women as representatives of the household -beside their husbands- in the applications for National Aid Fund, and enabling them to be the cash recipients (ongoing effort). ▪ 2020: Social Security Maternity Fund supporting maternity leave. However, the fund covers only waged employees, but excludes women in the voluntary scheme (self-employed, entrepreneurs…etc). ▪ Setting targets for ensuring women as beneficiaries in national programs such as the National Employment Program, Youth Technology and Jobs, and the Industry Support Fund Childcare ▪ 2018: Approving the bylaws for licensing home based nurseries ▪ 2021: Adoption of accredited training for childcare workers by the Technical and Vocational Skills Development Council ▪ 2021: Launch of the Reaya program, which allows providing subsidies for childcare services through the maternity fund at the Social Security Corporation (SSC), benefiting working women and nurseries enrolled in SSC. ▪ 2023: Through the Ministry of Social Development, a grant scheme is put in place to provide eligible NGOs with support for the establishment of nurseries. Employment: ▪ Since 2008, provide support for Satellite Work Factories which have largely benefitted women in rural areas, mostly in the garment sector. Public Transport ▪ 2022: A transportation subsidy for women hired through the National Employment Program provided ▪ 2023: Ensuring an integrated affordable fare for public transport, addressing women needs. ▪ Adoption and operationalization of the Code of Conduct for Public Transport (ongoing) ▪ Completing the national Bus Rapid Transit connecting Zarqa to Western and Southern Amman and to the airport, and its feeder network (ongoing). ▪ Preparing for public transport enhancements in secondary cities. CHILDCARE: About 1.5 million children are left day on care work – in addition to their paid work. without opportunities to access childcare services; an Thus, it is not surprising that family responsibilities expansion of provision can ease constraints on many are the main reason reported by mothers for not women who are willing to work. participating in the labor market. Mothers’ responsibilities as caregivers are The second State of the Mashreq Report34 found among the major constraints that limit their that female labor force participation in Jordan could ability to join the labor market. Mothers who do increase between 2.5 and 7.3 percentage points not work spend on average 12 hours a day on unpaid depending on whether childcare services are care work, while working mothers spend 8 hours a 34 World Bank (2023) 43 Jordan Economic Monitor Fall 2023 provided for pay or free of charge. To inform the of 51 districts are lacking any formal childcare service design of effective policies and programs, a provision).37 These districts that lack any childcare fieldwork study (World Bank, forthcoming) was services, however, do not have the lowest population undertaken to explore both the demand and supply of children under five (Figure 2.15). sides of childcare services. It sheds light on the There is a sizeable untapped demand for availability, accessibility, and quality of existing childcare services in Jordan, which can shift childcare services, and on families’ expectations of women’s willingness and ability to work and care services and willingness to pay, especially across create new jobs for them. The uptake of childcare different geographical locations.35 services is more prevalent amongst working women, especially women with higher income (JD 600+). The supply of childcare services in Jordan is Almost a third of mothers with children who are not limited; formal services are concentrated in a few using formal childcare would be willing to do so, but populous urban areas and are dominated by only half of them are willing to pay for it. Relatedly, private providers. It is estimated that only 2.3 around 73 percent of mothers with young children percent of children aged 0 to 5 are benefitting from would be willing to work more if formal childcare formal childcare. The total capacity of licensed services were available for a fee, and 80 percent if the childcare providers can only serve less than 3 percent services were provided for free. This expansion can of children below the age of five.36 This leaves about also create new jobs for women: it is estimated that 1.5 million children without access to childcare as many as 60,000 additional caregivers would be services (unserved). It is estimated that Jordan would needed if services expand to cover one-fourth of the require over 40,000 additional childcare facilities to service gap.38 More than half of women express provide formal childcare services to all children under interest in working in the care sector: as many as 82 the age of five. The geographical distribution of the percent of unemployed mothers would be willing to childcare providers indicates differences in engage in care work. Additionally, there is need for opportunities to access formal childcare services afterschool care, in particular when both parents (Figure 2.14). Three out of four childcare providers work outside the home, but the prevalence of this are located in the urban, populous governorates of service is limited and unregulated. Amman, Zarqa and Irbid. At the same time, 11 out 35 World Bank, forthcoming-a. A fieldwork study took (users and non-users of childcare services) and fathers. place between February and July 2021, consisting of three Purposive sampling was used to select the districts for the main elements: (i) First, a national spatial analysis that second and third elements of the assessment. compared the population of children below the age of five 36 As of January 2021, there is slightly over 1,100 childcare with the supply of services based on a list of all licensed facilities in Jordan with a total capacity of about 33,000 childcare facilities provided by the Ministry of Social children and uneven distribution among types. Development (MoSD). Second, an in-depth assessment 37 These are located in the northern region (Bani Kenanah, (survey) of service providers in selected low and middle- Aghwar Shamaliya, Wasatiya, Rwaished) central region income districts. Third, a demand assessment consisting of (Shoonah Janoobiyah, Dhieban) and in the south (Faqo’e, Ayy Qasaba, Mazar Janoobee, Qatraneh, and Huseineyia) a household survey of mothers with children below the age 38 Based on calculations of care provider to children ratio. of five supported by focus group discussions with mothers 44 Jordan Economic Monitor Fall 2023 Figure 2. 12 Geographic distribution of nurseries Figure 2. 13 Geographic distribution of 0-5 children Data sources: Ministry of Social Development Records and Nurseries Spreadsheet prepared by the Ministry- January 2021 supported by phone survey. Socio-economic status may be affecting access facilities. Expectations for quality childcare and uptake of childcare services, hence the facilities focused on safe environments. In Jordan, need to prioritize the affordability of childcare quality vary within childcare providers, in elements services. The cost of childcare services available in relating to human resources, learning, and the market is 25 percent of actual or potential labor opportunities for interaction with parents. High set market earnings, which means that both up costs may also compromise service quality and affordability of services and wage equity need to be increase fees. Generally, private providers comply prioritized. Only 13 percent of all providers have a with infrastructural legal requirements, such as majority of children coming from low-income square meters per child, and have the lowest child- households, and less than 10 percent of children to-caregiver ratio. As most financing goes towards enrolled in private nurseries come from low- rent and meeting licensing infrastructure income households. Workplace-based childcare requirements, this means that fewer financial providers present in low-income neighborhoods resources are orientated towards other quality only serve the children of their employees and thus dimensions. rarely include children from the community. Figure 2. 14 More than two thirds of mothers are However, while 64 percent of mothers in the eleven willing to up take childcare services low to middle income districts - who never used childcare facilities before - showed interest in up 64% taking childcare services (Figure 2.14), 28 are not Total 28% interested. Amon these, 27 percent have 9% particularly identified cost (19 percent) and 53% availability of services (8 percent) as top reasons for Non-working 36% not sending their children to childcare (Figure 12% 2.15). The cost factor may also be related to the fact that very often (40 percent of surveyed families), 80% Working 18% the mother pays for the costs of childcare in full 3% and pay more than one-quarter of their monthly income for childcare. Yes No Don't know Families participating in discussion groups Demand side survey. N=224 showed more interest in the quality of the Source: World Bank (forthcoming) curriculum and caregivers’ capabilities than the quality of nursery infrastructure and 45 Jordan Economic Monitor Fall 2023 Figure 2. 15 Cost and availability are top reasons for supported childcare while the remaining ones were not sending children to childcare in the process of exploring, planning or developing childcare solutions. The top reason for not taking My child is too young Other for nursery such action is not seeing the need nor the benefits 6% of offering this support and lack of support of I do not want No need - senior leadership for the provision of childcare strangers to take I take care care of my child of my services for employees. Other challenges include 14% child regulation/legal, financial, organizational, and 46% provisional aspects. Surveyed employers lack clarity on the organizations’ liability, and the cost of There are no building the infrastructure, while having to nurseries for Nearby nurseries consider the factors such as employees’ residence the age group are too locations, as well as lack of space and infrastructure of my child expensive 8% 19% requirements to establish workplace nurseries. Nevertheless, companies that do provide childcare Source: World Bank (forthcoming) support solutions observed a significant positive impact on talent acquisition, employee’s retention Childcare quality in public institutions also varies, and satisfaction, productivity, work-life integration, where a mere 9 percent of childcare facilities in increased diversity, enhanced workplace culture, public schools have a curriculum/program controlling employee absenteeism, women’s career compared to over 80 percent among childcare advancement, motivation, and on helping the facilities in public institutions, both serving company to become an ‘employer of choice.’ 40 government workers. More generally, the quality of childcare in public institutions is not well-mandated TRANSPORT: six in ten non-working women nor inspected, resulting in little incentive to identify commuting as a key barrier to working in improve services. In addition to these concerns the Greater Amman Region. An affordable, over quality, not all families are able or willing to comfortable, safe, time-efficient, and reliable public pay the current fees. Survey results also reveal that transport system is key to enabling both men and mothers expect a reservation wage higher than women to exercise their right to work. average wages to be able to enroll their children in Most women are unable to spend long hours nurseries. This gap between the current fees of away from home. With the time spent on childcare services and families’ willingness to pay is commuting being added to the time spent working, large, especially outside Amman. it constitutes a major factor in their calculations of Despite well-established evidence for enacting the benefits and costs of a job. Many people from employer-supported childcare, a range of legal, lower- and middle-income families, in particular, regulatory, organizational and financial rely on the public transport system as a lifeline to barriers are deterring employers from adopting reach economic opportunities. Therefore, better such practices. Workers in about 1000 private access to public transport can help reduce sector companies should have access to employer- inequality by improving labor market outcomes.41 supported childcare options, as per legal The GoJ has been taking many steps to enhance obligation.39 Yet, around 80 percent of surveyed public transport services. For example, the employers had no intention to provide employer- introduction of the country’s first mass transit 39 Labor law (article 72) mandates that companies 40 See for example IFC (2017) and World Bank Group employing at least 20 women who have among them at (2020b). least 10 children younger than four years must provide 41 Even without counting for its impact on women’s care for those children by a trained nurse at an adequate labor force participation, transport-related inefficiencies childcare facility. cost Jordan about USD 3 billion annually (at least 6% of GDP). Source: World Bank, 2022 C 46 Jordan Economic Monitor Fall 2023 system (Bus Rapid Transit—BRT Phase 1) in gap with men). They are much more reliant on taxis Amman and the integration of fares with feeder and call cabs to meet their mobility needs, while the services in the soft operations of the BRT Phase 1 share of public transport usage amongst both men are all steps in the right direction. Yet, there are and women remains low. Work is the main reason specific deficiencies in the public transport system for using public transport among men, while that are preventing women from being personal and other activities (including worship, economically active. A World Bank study focusing social, medical, and care visits) are the main reasons on the Greater Amman Region (henceforth for women. Among public transport users, referred to as Amman) identifies some of these key microbuses are the dominant means of transport challenges.42 used by both men and women (Figure 2.17). On Figure 2. 16 People in the central areas of Jordan can average, they take almost an hour and use almost access much larger share of jobs two (1.8) public transport vehicles to complete a single trip. These staggering statistics point to the importance of the feeder network and the network coverage by public transit. Six in ten non-working women identify commuting as a barrier to working, and 97 percent identify at least one transport-related constraint. Women users of public transit identify many challenges that they face, with the cost of commuting and the length of trips being the top two challenges that women report. Women users also identify the lack of comfort (including aspects like sitting space, air conditioning, ability to travel with children and shopping, ease with which buses Source: Alam and Bagnoli (2023) can be boarded and alighted, wait times at transit Accessibility to jobs through public stops, availability of bathrooms, etc.) as the top transportation and walking is low. Estimates challenge that they face, in addition to waiting times demonstrate that on average people in Amman can at public transit stops (Figure 2.18). These findings only reach 18 percent of the total jobs in the also indicate that there is a “latent desire” to work metropolitan area in under 60 minutes using public amongst women who are currently not transport and walking. Figure 2.16 shows that economically active, should the transport people in the central areas of Jordan can access conditions become more favorable. much larger share of jobs (signified by the lighter Surveys in Amman reveal that safety is one of color) than those living in the peripheral areas the most important constraints to women’s (signified by the darker color). This is an artifact of participation. For women, public transport stops both jobs density and routing of public transport lack the presence of guards or police, have a low services. number of other women present, and have poor The design and operation of the public quality pavements/sidewalks which can lead to transport system need to account for the safety concerns for them. Previous surveys43 different mobility patterns and needs of men indicate that 62 percent of women said they were a and women. Women are less mobile than men - target of some form of harassment.44 It is estimated only 53 percent of working-age women are that a 5-percentage point improvement in safety estimated to make at least one trip a day (a 16-pp around public transit stops in the Greater Amman 42 Alam and Bagnoli (2023) 44 The study accounts for the following forms of 43 Sadaqa (2018) harassment: (a) uncomfortable/inappropriate stares, (b) verbal abuse, (c) stalking, (d) physical abuse & others. 47 Jordan Economic Monitor Fall 2023 Region would increase female labor force allow them to reach employment opportunities and participation (FLFP) by 4.7 pp, from 13.6 to 18.3 would impede them from fully gaining among working-age women. In practice, this employment. corresponds to 59,000 additional women in the Figure 2. 17 Women in Amman rely more on private labor force in Amman. If all the additional women transportation means looking for work were to find employment, it could lead to a total additional income of over JD 356 million per year50, equal to a 2.3 percent increase in Amman’s GDP. While safety is the most important constraint among women overall, spatial accessibility appears to constrain women from lower-income households. A 5-pp increase in the share of jobs accessible within 60 minutes using public transport and walking would increase the LFP of women from lower-income households by 6.1 pp.45 The costs of not improving public transport for women are high. Even in a scenario where all other constraints to women’s access to employment were to be removed, the existing Source: Alam and Bagnoli (2023) quality of public transport in Amman would not Figure 2. 18 Several challenges and improvements are identified by women public transport users 45 While accessibility and safety appear to affect women’s to employment opportunities, making them more likely likelihood of looking for a job in Amman, they seem to to look for jobs actively, complementary actions are have little impact on their subsequent employment needed to translate this active participation into gainful probability. This is consistent with the idea that while employment. This, therefore, represents missed public transport is critical to improving women’s access opportunities for women in Amman. 48 Jordan Economic Monitor Fall 2023 The Road Ahead willingness to enter and remain in the labor market (Annex 2). Back-of-the-envelope The evidence presented demonstrates that calculations suggest that the expansion of formal protecting and investing in girls’ and women’s childcare could result in an increase in FLFP by 2 - capital is a prerequisite to her integration and 7 ppt depending on whether services are provided contribution to economic development. for pay or free of charge. On public transportation, Contrary to the current beliefs, there is still an there is need to extend a well-functioning, unfinished agenda to improve girls’ education, as comfortable and safe public transport system. It is enrolment is high but education attainment is still estimated that improving safety in public transport below expectations, with only 20 percent of women by 5 percentage points could lead to a 4.7 ppt aged 25+ finishing their tertiary education. These increase in FLFP, from 13.6 to 18.3 percent of are the most economically active. The drop in labor working-age women. force participation upon marriage is more likely for To guide the expansion and improvement of women with lower levels of education (a 50 percent the childcare sector, a National Policy on reduction among women with less than high school childcare is needed. This should bring in all education), but declines as the level of education relevant stakeholders and ensure system coherence increases (13 percent at the postgraduate level).46 to increase access to affordable, quality childcare Hence, it is essential to provide a safety net for girls options for families, and improved learning within poor households, to mitigate the risk of early outcomes for children. This policy framework marriage, school dropout or jeopardized health. should indicate clear mandates and coordination The road to economic participation starts with mechanisms and could also identify how to protecting the human capital of the poor. improve the quality of childcare services. Norms and attitudes pose a barrier in all Beyond the strategy, there is a need to increase contexts, but they can be tackled. Concerns the supply and access to childcare. It is regarding the suitability of women’s employment necessary to consider diverse modalities of and women’s household roles can be tackled in childcare provision to meet various preferences, many ways, including by circumventing the including quality of services, operating hours and challenges that feed the stereotypes and practical catering to different age groups. Additionally, factors opposition (providing care services) to coverage for the most vulnerable families and allow women to work (Halim, O’Sullivan & Sahay disadvantaged women who are willing to work 2023). should be prioritized and low-cost or free options Global evidence suggests that impactful policy made available. Both the supply and demand measures can deliver promising changes in assessments reveal that there are geographic women’s economic participation.47 However, disparities and lack of overall service capacity, there is no silver bullet, addressing one constraint leaving especially disadvantaged children and is often necessary but insufficient. Instead, a full families behind. Various governorates or districts range of priorities and complementary actions are could benefit from context-specific solutions. For needed to improve women’s access to employment example, urban areas can benefit from center-based opportunities, make them more likely to look for nurseries of large capacity whereas areas of low jobs actively and translate this active participation population density may need smaller facilities, such into gainful employment. run by non-profits, cooperatives and home-based nurseries. Beyond building their human capital and protecting it, improvements in two key areas To alleviate the burden on families - and (childcare provision and public transportation) especially working and non-working mothers, can make a difference in women’s ability and there is a need to ensure that sufficient 46 Kasoolu et al, 2019 47 See Annex 2. 49 Jordan Economic Monitor Fall 2023 financing is allocated to make quality childcare children, heavy bags and belongings, or with affordable and attractive. As the supply and reduced physical mobility. Addressing demand assessments have shown, the financial overcrowded vehicles could also provide more burden disproportionately falls on families, and comfortable for women, and so would do the especially mothers, to pay fees while the burden to improvement of waiting areas around stops and establish and maintain nurseries almost exclusively providing bathroom facilities at public transit stops. falls on owners to fund. Additionally, there is a Lastly, providing a safe environment for women can need to improve the financial sustainability of the also encourage many of them to use public sector to reduce service costs, which affects the transport including to work, notably through financial sustainability of existing nurseries as well measures to enhance the visibility at public as the incentive for expanding future supply and transport stops and better walkways. This would demand, which is particularly concerning to private also require a code of conduct for public transport nurseries. Inadequate financial resources have also drivers and an easy mechanism to report gender- subsequent implications on quality. based violence as well as receive a swift response to these reports. To improve the transport system, specific actions range from public investment in the The GoJ has undertaken several initiatives to public transit network to enhancing comfort advance the reforms agenda on women’s and safety. Actions to improve the coverage of the economic participation, but a comprehensive public transport network include for instance the institutional renovation, together with creation/enhancement of mass transit (such as enabling policies and a clear signal regarding BRTs), improving the feeder network, and creating the role of women, are all crucial in removing integrated corridor management, increasing the barriers and facilitate the integration of women frequency of service, rethinking the placement of into the labor force. Other countries’ experience existing public transit stops, and supporting a shows that a remarkable transformation is possible supply and demand analysis and a reroute based on to achieve in a brief timeframe, provided the demand. Actions for making public transport more enabling policies are in place. It is also critically affordable could include charging integrated fares for important to accelerate the structural reforms that multiple legs of a public transit trip can reduce the can induce transformation in the economic overall cost of transport and make it more landscape and help generating the necessary affordable. Women would also be more demand for labor through more private sector jobs encouraged by improvements in the comfort of creation. trips, for example by making it easier to travel with 50 Jordan Economic Monitor Fall 2023 Figure 2. 19 There is no silver bullet: a full range of priorities is needed to improve women’s economic participation 51 Jordan Economic Monitor Fall 2023 Annex 2. Global Evidence Suggesting Impactful Policy Measures for FLFP Intended Challenges Global Evidence Outcome - Women’s probability to join the labor force in developing countries: limited access to safe transportation accounts for an estimated 16.5 percent Safety in reduction (ILO 2017). public - Infrastructure investments that make it more convenient and safer for women transport to use public transport in Lima, Peru can generate important labor market impacts for women residing in those areas (Martinez et al 2018) Safe & affordable public transport - Women spend a higher share of their income on public transport than men (Lecompte & Bocajero 2017), making more multi-stop trips, carrying additional luggage, often accompanied by children/elderly which forces them to rely on Affordability more expensive choices like taxis (Mejía-Dorantes & Villagrán 2019). of public - Public transport pricing creates an affordability trap for women. The high transport cost of traveling reduces employment avenues and market access for women, thereby reducing women’s avenues to earn, and in turn makes transport unaffordable (Borker 2022). - Policies matter: Ethiopia increased enrollment rates in ECE from 5% in 2010 to 80% in 2021 following policy reforms that promoted access to ECE (Kim et Childcare al. 2022; Bendini & Devercelli 2022). policy - Enactment of laws: a WB global study - included 95 countries - found that the coherence enactment of laws governing the provision of childcare services increases FLFP by 2 pp, on average. The effect increases over time, reaching up to 4 pp after five years (Anukriti et al. 2023). - Increased enrolment: Evidence from Uzebkistan (World Bank 2013) and global evidence (OECD 2017) shows a positive correlation between quality of ECE services(highly qualified pre-school teachers, fully equipped pre-schools..etc) and Quality of enrolment rates. Evidence from LAC shows that the quality of childcare services childcare is one of the factors that determine take-up rates (Mateo Díaz & Rodriguez- workers & Chamussy 2016); Redaelli et al 2023. nurseries - Quality childcare impacts FLFP: Evidence from Germany shows that women Increased whose children are enrolled in high-quality ECE services showed a significant access & use of increase in working hours compared to those who don't (Stahl & Schober 2019). quality childcare - Reduced women’s time constraints: global evidence suggests that access to services childcare and preschools reduces women’s time constraints, allowing increase in women’s employment and household income (Evans, Jakiela, & Knauer 2021). In Indonesia, an additional public preschool per 1,000 children in a district increases women’s work participation by 9.1 percent (Halim, Johnson, & Perova 2022; Cali 2022). Expansion - A range of interventions have proven effective: Provision of voucher to access childcare services at established childcare centers in Kenya led to a 17 of childcare percent increase in maternal employment (Clark, Kabiru, Laszlo & Muthuri options 2019). Provision of after school childcare (3 hours after school) in Chile led to a 6 ppts increase in maternal employment (Martínez & Perticará 2017). Provision of access to childcare centers in rural DRC led to an 11 ppts increase in women's participation in commercial agriculture (Donald & Vaillant Forthcoming). In South Africa, an expansion pilot provided targeted subsidies to existing NGO and private childcare providers catering to the poor was proven highly cost- effective, leading to a large expansion in access for the poor (Biersteker 2010). 52 Jordan Economic Monitor Fall 2023 References Alam, M. Mehmood and L. 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