Jordan’s Economy Faces Setback, Prime Minister Highlights Impact of Gaza Conflict
Jordan’s Prime Minister, Bisher al Khasawneh, expressed concerns on Tuesday about the adverse effects of the Gaza conflict on the nation’s economy. Despite a promising economic performance in 2023, disruptions caused by the conflict, including Houthi militant attacks impacting Red Sea shipping, have thrown a wrench into Jordan’s economic momentum.
Economic Outlook Before the Conflict
Prime Minister Khasawneh highlighted the robust economic landscape that Jordan enjoyed in 2023 before the Gaza conflict escalated. The country was witnessing a promising surge in tourism revenues, with a growth rate poised to reach 2.8%, indicating a potential reversal of years of stagnant growth.
Impact on Tourism and Other Sectors
The Gaza conflict’s fallout has hit Jordan’s tourism sector significantly, with disruptions stemming from the Oct. 7 attack by Hamas on Israel. This setback has impeded the positive trajectory that the sector was experiencing, as tourism receipts had surged nearly 40%, generating $5.15 billion in revenues. Other sectors are also grappling with the aftermath of the conflict, contributing to the economic challenges faced by the nation.
Challenges in Shipping and Inflation Concerns
Shipping disruptions in the Red Sea, a key East-West route, have been exacerbated by Houthi militant attacks, leading to increased transport costs. Cargo arriving at Aqaba’s Red Sea port from southeastern Asia has seen a rise of approximately 160%, while Europe- and U.S.-bound cargo has experienced increases between 60% and 100%. Business leaders are expressing concerns about potential inflationary pressures in a country where inflation is projected to be a modest 2.6% this year.
Economic Modernization Plan and IMF Support
Despite these challenges, Jordan remains committed to enhancing its competitive edge through an economic modernization plan launched last year. Prime Minister Khasawneh highlighted the recent approval by the International Monetary Fund (IMF) of a new $1.2 billion, four-year loan program to support Jordan’s economic reforms. This development is seen as a testament to investor confidence in the country’s economic policies and political stability.
Jordan’s Response and Outlook
Prime Minister Khasawneh affirmed Jordan’s resilience and stability, emphasizing the country’s ability to maintain stable sovereign credit ratings despite external challenges. The accelerated reform agenda, coupled with support from international institutions like the IMF, positions Jordan to mitigate the negative impact of the conflict. Khasawneh expressed optimism about the nation’s economic recovery, stating, “We are hoping to see things back on track soon.”
The economic setback caused by the Gaza conflict poses challenges for Jordan, particularly in sectors like tourism and shipping. However, the country’s proactive economic modernization plan and the recent IMF support signal a commitment to overcoming these challenges and steering the economy back on course. As Jordan navigates these complexities, the government’s resilience and stability remain pivotal in ensuring sustained economic growth.
