Jordan was rocked by the wave of unrest that swept across the Arab world in early 2011. In an effort to placate the opposition, which is composed of Islamists, leftists and youth groups, the king, Abdullah n, initiated a limited reform programme—which has been met with scepticism. The Islamic Action Front (the political arm of the Muslim Brotherhood) boycotted the parliamentary election in January 2013 in protest at the amended electoral law, and it continues to demand further political reform. There are signs that the electoral law might be amended in advance of the next elections scheduled in 2017, but it remains to be seen if this would meet opposition demands. Despite this unsettled backdrop, power in Jordan remains firmly in the hands of the king, who retains the loyal support of the army and the security services. The ongoing shifts in regional politics will test Jordanian diplomacy. The civil war in Syria and the rise of Islamic State (IS), a violent jihadi group, are particular worries, given a mounting refugee problem and serious security concerns. The king's support for US policy in the Middle East, and Jordan's ties with Israel in particular, will ensure that Jordan remains a target for Islamist opprobrium.
We forecast that the economy will grow only modestly in 2014, with domestic demand growth depressed by regional political instability and fiscal austerity, and the continued uneven performance of the world economy affecting Jordan's export markets. Although we expect some pick-up in 2015-18, growth will still remain below the stellar levels witnessed during the construction boom of 2004-07. We expect the government to rein in spending growth in 2014-18, helped by further cuts in subsidies. However, the fiscal deficit (excluding grants) will still amount to a sizeable 5.1% of GDP at the end of the forecast period. The current-account deficit—although remaining large—will narrow as global oil prices weaken, thereby curbing the rate of import growth.
The economy's long-term economic performance should be supported by favourable demographics, but the boost in the population caused by refugee flows from Iraq and Syria will start to subside. A relatively liberalised economy, and progress on upgrading physical infrastructure, should aid economic growth. The government's focus on strengthening education and updating the curriculum should eventually help to boost productivity. However, Jordan will remain
vulnerable to regional political insecurity, although in recent years it has
demonstrated considerable resilience against such shocks.

ML01 5

ML02 6

Jordan-highlights 7

Political outlook 7

Demographic outlook 7

Business environment outlook 7

Economic outlook 8

Market opportunities 8

Long-term outlook 8

Fact sheet 9

Political outlook 10

Political forces at a glance 10

Political stability 11

Political and institutional effectiveness 12

Election watch 12

Key players to watch 13

International relations 14

Demographic assumptions 15

Business environment outlook 17

Jordan's business environment at a glance 18

Macroeconomic environment 18

Policy towards private enterprise and competition 20

Policy towards foreign investment 21

Foreign trade and exchange controls 22

Taxes 23

Financing 24

The labour market 25

Infrastructure 25

Economic forecast 27

Policy trends 27

Fiscal policy 27

Monetary policy 28

International assumptions 28

Economic growth 28

Sectoral trends 29

Inflation 31

Exchange rates 31

External sector 31

Foreign direct investment in Jordan 32

Market opportunities 34

Market outlook 34

Long-term outlook 37

The long-term outlook 37

Methodology for long-term forecasts 40

Data summary 42

Data sources and definitions 47

Guide to the business rankings model 48

Indicator scores in the business rankings model 49

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