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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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