meed-logo

line1 line2 line3
SIGN IN / REGISTER

Jordan policymakers walk tightrope

4 June 2024

 

Few countries will envy Jordan right now, as one of the Israel-Palestine-adjacent countries most severely impacted both economically and politically by the inevitable spillover of the war in Gaza.

Economic growth in Jordan has inevitably been hit by the conflict, especially in the country’s trade and tourism sectors. Domestic opposition to the war has meanwhile left Ammann walking a tightrope – opposing Israel while remaining part of a broad regional Western-backed coalition that saw Jordan play its part in stemming missile attacks launched by Iran at Israel in April.

The Gaza war is only one of a number of pitfalls confronting the government, which currently faces an unemployment rate of about 22%, desperate water scarcity, and the presence of 1.3 million Syrian refugees topping up the country’s existing population of refugees from Iraq, Palestine and elsewhere.

In these invidious circumstances, the country has performed well, but has also suffered negative consequences.

“Jordan has preserved economic and political stability despite significant external shocks, including social instability in the region (Arab Spring) and wars in neighbouring countries (Iraq and Syria), but these shocks have led to lower growth and significant government debt build-up,” says Erich Arispe, a senior director in Fitch Ratings’ sovereigns group.

For now, Jordan appears to be carrying off the delicate diplomatic work in relation to Israel. It is playing a critical role in the aid effort to Gaza, distancing itself from its neighbour by withdrawing its ambassador from Tel Aviv, and mothballing a planned water-for-energy project.

But it has so far resisted pressure from domestic protesters to adopt a more assertive stance towards Israel – not least since the government is wary of putting its relationship with the US under stress and threatening the $1.45bn in annual aid it receives from Washington.

Jordan’s reliance on Israeli water supplies will also play a part in Amman’s calculus. The kingdom typically sources around 80% of its natural gas from Israel’s offshore Leviathan field.

Despite deep antipathy to Israeli Prime Minister Benjamin Netanyahu’s government, the reality is that Jordan is locked into a cooperative relationship with its neighbour, including through the Hashemite dynasty’s custodianship of the Al-Aqsa mosque compound in Jerusalem.

Economic effects

While Jordan is unlikely to take radical steps to change its relationship with its neighbour, it remains deeply impacted by Israel’s actions, with the economic implications of the conflict in Gaza being felt nationwide.

The Jordan Hotel Association reported that about half of its hotel reservations were cancelled in October 2023. Fitch Ratings expects that lower tourism inflows, weaker external demand and continued regional political uncertainty will slow growth to 2.3% in 2024, from 2.6% in 2023.

“Nevertheless, we expect that the decline in US and European tourists will be partly compensated by resilience in Jordanian expats and regional tourists. Before the start of the Gaza conflict, Jordanian expats and Arab and GCC tourists accounted for almost three-quarters of total visitors,” says Arispe. 

Although the IMF warned in May that the continuation of the war and the trade route disruptions in the Red Sea are affecting sentiment, trade and tourism, barring a significant escalation, the Jordanian economy should be able to navigate the challenges.

While Jordan is primed to run a large current account deficit, at a projected 6.4% of GDP in 2024, this is still lower than the 6.8% deficit recorded in 2023.

According to Fitch, the general government deficit will ease to 2.6% in 2024 and 2.4% in 2025, as expenditure restraint will balance lower-than-budgeted revenue growth and higher interest payments. 

“One of the main economic challenges for policymakers is to lift growth prospects to support a sustainable reduction in government debt,” says Arispe.

In its May rating affirmation, Fitch estimated that general government debt (consolidating central government debt holdings of the Social Security Investment Fund and including the Water Authority of Jordan debt and NEPCO guaranteed debt) rose to 93.3% of GDP at the end of 2023.

Although it forecast debt will decline to 91.3% by 2025, this will remain significantly above the projected 53.6% median for sovereigns rated ‘BB’.

“Jordan’s fiscal strategy aims to lower debt to 80% of GDP by 2028 based on a combination of revenue increases, through measures directed at broadening the tax base, and expenditure restraint,” says Arispe.

“Nevertheless, Fitch considers that the sustainability of the current fiscal strategy will depend on the success of reforms aimed at lifting growth prospects combined with increased employment.”

External support

For all the Hashemite kingdom’s vulnerability to regional conflicts, its strategic position also carries advantages. Jordan has attracted substantial external support in the past year, drawing on its status as a regional source of stability.

Early in 2024, the IMF began a new four-year, $1.2bn Extended Fund Facility (EFF).

“From a broader perspective, one of Jordan’s strengths in terms of creditworthiness is the strong relations with multilateral organisations and allies, including the US and partners in the region, which supports Jordan’s financing flexibility. The sovereign is projected to receive total foreign assistance of $3.5bn (6.5% of projected GDP) in 2024,” says Arispe.

In addition, Jordan is attracting significant Gulf investment. In late May, the country’s Investment Ministry announced that Abu Dhabi Development Holding Company (ADQ) had completed the establishment of an infrastructure investment fund company in Jordan. This deal was first mooted during King Abdullah’s visit to Abu Dhabi in 2023.

This company will invest in infrastructure and development projects worth $5bn.

The government also remains committed to its reform agenda, for example, by gradually increasing water utility tariffs last year.

“We expect, though, that the pace of reform progress will continue to depend on the objective of preserving social stability, the resistance of vested interests and institutional capacity constraints,” says Arispe.

Reducing high unemployment is a government priority, especially among women and younger people.

The government is moving ahead with the first phase of its ambitious Economic Modernisation Vision 2023-33, which aims to increase growth potential (5%) and create 1 million jobs over the next decade through higher private investment in strategic sectors.

“The authorities have made progress in terms of digitisation of government procedures, most notably those related to investment, and public administration reform,” says Arispe.

“Nevertheless, increased geopolitical risks make it harder for the government to achieve the 2025 targets under the Vision’s 2023-25 first phase, including reaching 3% growth and exports reaching $13.7bn.”

Above all, the government will hope that external events will not yet have a negative bearing on an ambitious political reform programme that is invariably contingent on favourable regional relations.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11854327/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Chinese firm announces $1.9bn Abu Dhabi renewables contract

    23 March 2026

    China Power Construction Corporation (PowerChina) has announced details of a contract signed for the engineering, procurement and construction (EPC) works on part of Abu Dhabi’s $6bn round-the-clock solar and battery storage project.

    The independent power project (IPP) will combine 5.2GW of solar photovoltaic (PV) capacity with 19GWh of battery storage. Last October, Emirates Water & Electricity Company (Ewec) and Abu Dhabi Future Energy Company (Masdar) broke ground on what will be the world’s largest combined solar and battery energy storage system (bess), designed to supply 1GW of round-the-clock power.

    India’s Larsen & Toubro and Beijing-headquartered PowerChina were awarded the EPC contract for the project last year, with PwC Middle East advising Ewec on financial structuring.

    According to the Chinese firm, the full project has been divided into two blocks, north and south, indicating at least two major packages. 

    PowerChina’s contract, valued at about $1.9bn, covers the northern block of the project, which includes 2.1GW of DC-side PV installations and a 7.75GWh bess. The scope includes the design, procurement and construction of substations, PV facilities and battery energy storage systems.

    Located in the Mshayrif area of Abu Dhabi, the wider project is designed to supply steady delivery of power between April and October each year, the UAE’s peak electricity demand season due to cooling loads.

    This includes serving large energy users that require 24/7 clean electricity, such as fast-growing data centre operators and technology firms driving artificial intelligence deployment in the region.

    Ewec will act as the offtaker under a long-term power purchase agreement.

    MEED previously reported that China’s CATL (Contemporary Amperex Technology Co), Jinko Solar and JA Solar will supply the bess and PV modules, with Jinko and JA each providing 2.6GW of modules. 

    The project will avoid 5.7 million tonnes of CO₂ emissions annually and provide enough clean energy to power nearly half a million homes.

    Construction is expected to be completed in 2028.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16083288/main.jpg
    Mark Dowdall
  • Kuwait tenders major infrastructure packages

    23 March 2026

     

    Kuwait’s Ministry of Public Works (MPW) has tendered several contracts for infrastructure works across various parts of the country.

    The first tender covers the construction of rainwater drainage systems in the Sabah Al-Ahmad South, Sabah Al-Ahmad, Al-Khairan and Al-Wafra residential areas.

    The second tender includes the construction of a treated water system in Kuwait’s southern region.

    The third tender covers the construction of a treated water system in Kuwait’s northern region.

    The final tender covers the construction of roads, bridges, stormwater drainage, sewage and other services for a section of the Kabd-Sulaibiya Road, as well as a section of the Kabd-Sulaibiya industrial road link.

    MPW issued all of these tenders on 22 March, with a bid submission deadline of 21 April.

    UK analytics firm GlobalData expects Kuwait’s construction industry to grow by 5.1% in 2026-29, supported by government investment in the oil and gas sector aimed at raising production, as well as investment in the infrastructure sector.

    In the short term, growth will be boosted by planned expenditure under the 2025-26 budget, which was approved in March 2025.

    The construction industry in Kuwait is expected to record an annual average growth rate of 4.9% in 2026-29, supported by investments in renewable energy, transport, and oil and gas projects.

    The commercial construction sector is expected to grow by 4.8% in 2026-29, supported by public and private sector investment in the construction of hotels, retail outlets and office buildings.

    READ THE MARCH 2026 MEED BUSINESS REVIEW – click here to view PDF

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16083252/main.jpg
    Yasir Iqbal
  • Qiddiya tenders new infrastructure package

    23 March 2026

     

    Saudi Arabian gigaproject developer Qiddiya Investment Company (QIC) has tendered a contract inviting firms to bid for new infrastructure works in Qiddiya Entertainment City.

    The scope covers two infrastructure development packages in District 0 of Qiddiya Entertainment City, including the construction of four event park-and-ride facilities.

    The tender was issued on 11 March, with a bid submission deadline of 22 April.

    Lebanese firm Dar Al-Handasah and Saudi-based Sets International are serving as project consultants.

    QIC is accelerating plans to develop additional assets at Qiddiya City. Earlier this month, the company set a 16 April deadline for firms to submit prequalification statements for the Qiddiya high-speed rail project in Riyadh.

    Previously, MEED reported that QIC had received bids from contractors on 23 February for a SR980m ($261m) contract covering the construction of staff accommodation at Qiddiya Entertainment City.

    The project will cover an area of more than 105,000 square metres (sq m).

    Last month, QIC started the main construction works on its performing arts centre at Qiddiya Entertainment City.

    The Qiddiya City performing arts centre is one of several major projects within the greater Qiddiya development. Other projects include an e-games arena, Prince Mohammed Bin Salman Stadium, a motorsports track, the Dragon Ball and Six Flags theme parks, and Aquarabia.

    In December last year, QIC officially opened the Six Flags theme park to the public.

    The theme park covers an area of 320,000 sq m and features 28 rides and attractions, 10 of which are thrill rides and 18 designed for families and young children.

    The Qiddiya project is a key part of Riyadh’s strategy to boost leisure tourism in the kingdom. According to UK analytics firm GlobalData, leisure tourism in Saudi Arabia has experienced significant growth in recent years.

    The kingdom’s tourism sector posted record-breaking numbers last year, with over 130 million domestic and international visitors entering the kingdom, representing a 6% increase over 2024.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16083013/main.jpg
    Yasir Iqbal
  • Kuwait’s Mina Al-Ahmadi refinery attacked

    23 March 2026

    Register for MEED’s 14-day trial access 

    Several units were shut down at Kuwait’s largest oil refinery after it was hit by drones as Iran targeted energy infrastructure across the Gulf, according to a statement from state-owned Kuwait Petroleum Corporation (KPC).

    Fires broke out across multiple units at the Mina Al-Ahmadi refinery in the morning of 20 March 2026 following the attack.

    The refinery normally processes about 730,000 barrels of oil a day.

    There were no casualties as a result of the attack, according to KPC.

    Kuwait’s oil and gas sector has been severely disrupted by the ongoing regional conflict.

    On 10 March, MEED revealed that the state-owned upstream operator Kuwait Oil Company (KOC) was operating with just 30% of its total workforce in their normal workplaces.

    Earlier in the month, KPC also declared force majeure due to difficulties transporting oil and gas through the Strait of Hormuz caused by the conflict.

    Force majeure, a French term meaning “superior force”, is a clause included in many international commercial contracts. It allows companies to suspend contractual obligations when extraordinary events occur beyond their control.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16067425/main.gif
    Wil Crisp
  • Iraq declares force majeure on foreign-operated oil fields

    23 March 2026

    Register for MEED’s 14-day trial access 

    Iraq has declared force majeure on all oil fields developed by foreign oil companies as the US and Israel’s war with Iran disrupts navigation through the Strait of Hormuz.

    The initial attack and Iran’s response have slashed Iraq’s exports.

    Prior to the war starting on 28 February, Iraq was exporting between 3.3 and 3.5 million barrels a day of crude oil.

    Oil sales account for nearly 90% of Iraq’s government revenues.

    Earlier this month, two drone strikes hit infrastructure at Iraq’s Majnoon oil field, increasing security concerns in the country’s energy sector.

    One of the drones hit a communications tower, and the other hit the office of the US engineering company KBR.

    There were no casualties as a result of the attacks.

    Foreign workers were evacuated from the site days after the US and Israel’s war with Iran started, and only Iraqi staff are currently working at the site.

    Shortly before the war started, KBR announced that it had been awarded a “major contract” by Iraq’s state-owned Basra Oil Company to provide integrated field management services for the Majnoon oil field.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16067302/main.png
    Wil Crisp