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Jordan economy nears inflection point

11 June 2025

 

Jordan’s leaders are well-versed in dealing with the economic fallout from regional turmoil, but the past year has stress-tested this crisis management strategy to the limit.

With President Donald Trump raising questions about future US financial support for Jordan, and halting grants for a large water desalination project on taking office, anxiety levels in Amman have risen substantially this year.

In 2024, US aid covered around 20% of Jordan’s government budget deficit, so the concern is understandable. Added to this is the threat of the reciprocal tariffs announced in April, which could hit Jordan with a 20% rate – thereby pushing it into the top 10 most affected economies in the world – and the Hashemite kingdom’s concerns about the Trump administration’s actions are grounded in reality. For while Jordan should be able to negotiate down its tariffs, its exports to the US – one-quarter of its total – may still feel the imprint.

All this comes on top of the regional headwinds that have hit economic growth and placed additional strain on already pressured public finances. The Washington-based IMF sees GDP growth being held back at 2.6% this year, down from 3.1% in 2023 – the year before the full hit of the Gaza conflict was registered. However, the fund also noted that a stronger export performance is offsetting weaker domestic demand.

Even so, the spillovers from the Palestine conflict, especially in Jordan’s tourism sector, which accounts for 15% of GDP, will remain a policy challenge.

Capital Economics warned Jordan’s economy would continue to struggle due to the effects of regional conflict and fiscal constraints. The consultancy says a budget contraction of at least 4% of GDP is required to stabilise and lower the public debt-to-GDP ratio, but this may prove too tall an order for the government and would certainly weigh on its GDP growth.

Lower growth has long-term consequences for Jordan, given its stubbornly high unemployment rate (averaging above 20% since 2020) and low labour force participation rate.

On the more positive side, the IMF sees inflation remaining low, at about 2%, reflecting the Central Bank’s commitment to monetary stability and the exchange rate peg. However, the current account deficit is projected to widen slightly to just under 5% of GDP in 2025, from under 4% in 2023, due to lower tourism receipts and lower prices for key exports. 

The banking sector remains well-capitalised, with a capital adequacy level well above the regulatory minimum of 12%, noted the IMF. Non-performing loans remain relatively low.

Stress test results for the banking sector in 2024 suggested it is broadly able to withstand shocks even under the most severe scenarios. Bank mergers are also on the agenda, with Bank Al-Etihad preparing to acquire Investbank in what would be the country’s largest-ever banking consolidation.

US U-turn

Looking ahead, Jordanian officials believe the worst might be averted, having secured assurances from the White House that most foreign aid to Jordan – under which it receives an annual $1.45bn from the US – will survive intact and not be used as leverage in talks.

The reported resumption in March 2025 of payments from US firm CDM Smith, tasked with overseeing the $5bn Aqaba-Amman Water Desalination and Conveyance Project, will have come as welcome reassurance.

“What’s interesting is that the US quietly restarted the funding to Jordan, and we know King Abdullah has visited Washington DC a number of times, meeting with Trump administration officials,” says Annelle Sheline, a research fellow at the US-based Quincy Institute, and a former foreign affairs officer at the US State Department.

“Jordan has been very careful to cultivate relationships among both Republicans and Democrats, and that will have played a role in restarting this funding to Jordan.”

In addition, Jordan has secured funding from alternative sources, including the EU, which in January committed to extending a €3bn ($3.13bn) financial package. The 2025-27 package will include €640m in grants, €1.4bn in investments and €1bn in macro-financial assistance.

Despite these welcome support measures, analysts point out that the changing regional political weather may compromise Jordan’s capacity to attract financial support in future.

“Jordan has lost some of its value because of the Abraham Accords. It used to have a moderate Arab state role, with a relationship with Israel. But the value of that has really gone down. That’s why King Abdullah has been spending time in DC lobbying because he doesn’t know what Trump is going to come up with next,” says Neil Quilliam, associate fellow at the Middle East and North Africa programme at Chatham House.

Syrian opportunity

One factor that might positively impact Jordan’s economic prospects is the regime change seen late last year in its large neighbour Syria.

Jordanian figures show exports to Syria rose almost five-fold in the first two months of the year, reaching JD35.4m ($48.9m) compared to just JD6.1m ($8.5m) in the same two months of 2024.

Syria’s rehabilitation should also assist in the return of Syrian refugees from Jordanian territory, which number more than 500,000, reducing the considerable burden placed on Jordan’s economy. Further ahead, Syria’s sizeable reconstruction needs will put Jordan in an advantaged position to provide labour and construction materials.

“Syria’s opening is going to be beneficial in terms of trade,” says Quilliam. “Jordan isn’t necessarily going to be competing with Syria. The Saudis, the UAE, Qatar and Kuwait have been putting money into Jordan for quite a long time. And Syria is going to require a lot of construction materials that Jordan will be a transit for.”

Moving forward, Jordan may have a harder time getting funding out of Congress
Annelle Sheline, Quincy Institute

Fiscal jeopardy

The biggest cloud on the horizon is Jordan’s ability to maintain US funding over the long term.

The nearly $1.5bn a year that comes into Jordan from the US is authorised on a four-year cycle and so will have to be renewed at some point during the Trump presidency.

“That’s going to be the inflection point. They could be fine now for the next two years, but it’s going to get interesting,” says Quilliam.

As Sheline notes: “It [could be an] uphill battle, given Republican members of Congress were willing to vote against previous foreign aid, which suggests they would be willing to vote against funding for Jordan – given the perception that the US spends too much on sending money abroad. Moving forward, Jordan may have a harder time getting funding out of Congress.”

While the kingdom has overcome previous funding crises, and the prevailing logic is that Amman always muddles through, with a debt-to-GDP ratio of around 95%, the kingdom has remarkably little fiscal room in which to manoeuvre.

“The ratchet just gets tighter and tighter each year,” says Quilliam. “And it’s just getting closer and closer to something going wrong. If that $1.5bn from the US stops, then they’re in real trouble. That’s the backstop.”

MEED's July 2025 report on Jordan also includes: 

> GAS: Jordan pushes ahead with gas plans

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James Gavin

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    11 July 2025

     

    Across the Maghreb, amid a range of external and internal pressures, the pursuit of political stability is emerging as the overarching preoccupation for governments as they compete for trade, growth and investor interest.

    Wracked by drought, years of disruption due to Covid-19 and the impact of the war in Ukraine on grain prices, and now facing the boot of arbitrary US tariffs, the economies of the region need certainty more than anything.

    With fast-growing populations, all of the Maghreb countries face serious challenges in maintaining sufficient job creation to cater to their youth, and with local spending constraints, attracting foreign investment is key.

    None of the Maghreb countries seem to understand this better than Morocco, which has been rolling out what might be described as a GCC-style vision for the country. Most recently, in September 2024, it launched the Digital Morocco 2030 strategy to use artificial intelligence to improve access to services in rural and underserved areas.

    Such initiatives are central to Morocco’s broader New Development Model (NDM) strategy, first laid out in 2021 and recognised by bodies such as the Washington-based IMF as a key driver of economic transformation in the country. Key indicators for the NDM include doubling the country’s GDP per capita to $16,000 by 2035, doubling the rate of women in the workforce, raising renewables to 40% of total energy consumption and developing the digital sector to account for 5% of GDP.

    Rabat is also widening the country’s social security net, having expanded family allowances in 2023, and with plans to expand old-age pensions and unemployment benefits in 2025. The government is also improving access to services for Amazigh speakers in answer to loud political calls since the 2016-17 Amazigh-led Hirak Rif movement protests.

    From creating jobs to supporting vulnerable groups and minorities, the common thread in Rabat’s domestic policy is expediting measures to address emerging risks to social and political stability at source.

    Externally, Morocco has meanwhile intensified its diplomatic campaign for international recognition of its semi-autonomy plan for Western Sahara. First proposed in 2007, the scheme initially received little traction, but the situation changed significantly in 2020 with then US President Donald Trump’s recognition of Moroccan sovereignty over the territory as part of a deal to normalise ties with Israel. In 2022, Spain also shifted its stance to one of support for Rabat’s autonomy plan, followed by France in early 2024 and by the UK in June 2025 – each country for their own reasons.

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    Across the border in Algeria, the wheels of legislative change have also been slowly turning, with new hydrocarbons and investment laws, accompanied by the lifting of some restrictions on foreign ownership, raising the possibility of boosting inbound FDI.

    The government is also emphasising private sector-led growth and the rationalising of public spending, as well as initiatives to improve the business environment by reforming public banks and state-owned enterprises.

    President Abdelmadjid Tebboune secured his re-election for a second term in September 2024 with the support of 84.3% of the vote, in a reassuring referendum on the political stability of the country’s post-Bouteflika political order.

    Although the country’s politics remain marred by the suppression of the opposition, the broader shake-up in government is reflected in the ongoing reforms and demonstrates the country’s political awareness of the need to deliver.

    In a mirror image of Morocco’s diplomatic journey, Algiers has worsening foreign relations with Paris and Madrid due to its staunch opposition to the Western recognition of Moroccan claims to the Western Sahara region.

    In May 2025, Algeria expelled 15 French diplomatic agents, citing their “irregular positions” on the geopolitical issue. The incident matched similarly negative responses by Algeria to Spain in 2022.

    Trouble in Tripoli

    Libya remains deeply mired in the political deadlock between its two administrations – even as the years of rivalry between the administration has made it clear to all involved of the need for reunification for the stability of the country.

    Talks to establish a unified interim government and hold national elections have stalled over the past year, however, with armed clashes between rival militias in Tripoli in May 2025 only reaffirming the precarious state of affairs in the country.

    The UN remains central to Libya’s peace process, and in early 2025, the UN appointed Hanna Tetteh as the Special Representative for Libya, while a 20-member Libyan Advisory Committee was established to address contentions over the proposed electoral process.

    In May, the committee then outlined some potential solutions, but political consensus remains elusive, leaving little near-term hope for a resolution to the situation in the country.

    Turbulence in Tunisia

    Tunisia, meanwhile, faces issues stemming largely from political instability inflicted upon it under President Kais Saied, who has ruled by decree since dissolving the country’s parliament in 2021. In March 2025, Saied dismissed his third prime minister in less than two years and appointed Sara Zaafarani in their place.

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    Abu Dhabi petrochemicals producer Borouge has extended the deadline for contractors to submit bids for a project to increase production of butene-1 from the olefins conversion unit (OCU) at its Borouge 2 plant.

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    Borouge issued an advanced request for tender in May.

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    Borouge Group International

    Borouge is the petrochemicals-producing joint venture of Abu Dhabi National Oil Company (Adnoc) and Austrian energy company Borealis. Adnoc owns the majority 56% stake in Borouge, with Borealis holding a 34% stake. The remaining 10% of shares in Borouge trade on the Abu Dhabi Securities Exchange following an initial public offering in June 2022, from which Adnoc Group earned proceeds of $2bn.

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    11 July 2025

     

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    MEED understands that the contract is being finalised and is expected to be signed within the next few weeks.

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  • Hilton signs hotel agreement in Medina

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    Covering 24 million square feet in the Muwaileh district, the masterplan for Aljada includes residential districts, as well as retail, hospitality, entertainment, sporting, educational and healthcare components, and a business park.

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    The residential construction sector is expected to record an annual average growth rate of 2.7% in 2025-28, supported by private investments in the residential housing sector, along with government initiatives to meet rising housing demand.

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