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Jordan and the West Bank and Gaza Country Risk Report Q4 2017

Jordan and the West Bank and Gaza Country Risk Report Q4 2017

Core Views

Economic growth will pick up in Jordan over the coming quarters,largely driven by higher export levels. Fiscal consolidation will neverthelessweigh on consumption, preventing a stronger economicrecovery.

IMF-sponsored fiscal consolidation will lead to a narrowing of Jordan’sbudget shortfall over the years ahead – although progresswill only be gradual, as Amman holds back on socially sensitive taxhikes and spending cuts. The public debt-to-GDP ratio will beginto reduce from 2018 onwards and a shift towards external debt willsee servicing costs fall.

Inflation in Jordan will accelerate from 2016 levels, driven by risingglobal commodity prices and the introduction of selected fiscal consolidationmeasures. The Central Bank of Jordan (CBJ) will continueto track the US Federal Reserve’s monetary tightening cycle overthe coming years in order to protect the dinar’s dollar peg.

Jordan will remain among the most politically stable countries in theregion over the years ahead. While social tensions and protests arelikely to result from economic strain, and limited progress on democraticreform, these are unlikely to escalate into widespread unrest,as the maintenance of stability remains a key priority for Jordaniansamid heightened regional violence.

Core Views Although controversial Israeli security structures at the al-Aqsa compound (Temple Mount) have been removed, unrest will likely remain elevated across Jerusalem, the West Bank and Gaza in the quarters ahead, as tensions between Palestinians and Israelis are fuelled by the growing political and economic frustrations of the former, and the rising assertiveness of the latter’s leadership. The Palestinian economy will continue to suffer under Israeli border restrictions over coming years, as a peace deal remains off the cards. Economic growth will prove insufficient to substantially improve living standards or reduce unemployment across the West Bank and Gaza.


BMI Index
BMI Risk Index – Jordan
BMI Risk Index – West Bank & Gaza
BMI Index League Tables
Executive Summary – Jordan
Core Views
Key Risk
Chapter 1.1: Economic Outlook – Jordan
SWOT Analysis
Economic Growth Outlook
Higher Exports To Facilitate Gradual Uptick In Growth
Economic growth will pick up in Jordan over the coming quarters, largely driven by higher export levels. Fiscal consolidation will
nevertheless weigh on consumption, preven ting a stronger economic recovery.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Fiscal Stability To Strengthen As IMF-Stipulated Measures Take Effect
IMF-sponsored fiscal consolidation will lead to a narrowing of Jordan's budget shortfall over the years ahead – although progress will
only be gradual, as Amman holds back on socially sensitive tax hikes and spending cuts. The public debt-to-GDP ratio will begin to drop
from 2018 onwards and a shift towards external debt will see servicing costs fall.
Structural Fiscal Position
TABLE: CENTRAL GOVERNMENT REVENUES AND EXPENDITURE, 2015
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Monetary Policy
Acceleration In Inflation Ahead
Inflation in Jordan will accelerate from 2016 levels, driven by rising global commodity prices and the introduction of selected fiscal
consolidation measures. The Central Bank of Jordan (CBJ) will continue to track the US Federal Reserve's monetary tightening cycle
over the coming years in order to protect the dinar's dollar peg.
Monetary Policy Framework
Chapter 1.2: 10-Year Forecast – Jordan
The Jordanian Economy To 2026
Expanding Private Sector Offers Strong Potential
An expanding private sector will underpin Jordan’s economic progress over our 10-year forecast period. Nevertheless, a growing young
population, combined with limited employment opportunities, could pose downside risks to our long-term outlook, especially if progress
in reforming the economy remains subdued.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Contents
Chapter 1.3: Political Outlook – Jordan
SWOT Analysis
Domestic Politics
Social, Political Pressures To Remain Manageable
Jordan will remain among the most politically stable countries in the region over the years ahead. While social tensions and protests are
likely to result from economic strain, and limited progress on democratic reform, these are unlikely to escalate into widespread unrest,
as the maintenance of stability remains a key priority for Jordanians amid heightened regional violence.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Further Reforms On The Horizon?
Following a series of political and economic reforms by the government in the recent years, we maintain that Jordan's long-term political
outlook is among the most stable in the region. Nonetheless, we highlight that the social uprisings that emerged in the region at the start
of 2011 are indicative of the threat that high unemployment, low living standards and lack of political freedoms – all features that Jordan
shares – pose to long-term stability.
Executive Summary – West Bank & Gaza
Core Views
Key Risks
Chapter 2.1: Economic Outlook – West Bank & Gaza
SWOT Analysis
Economic Growth Outlook
Bleak Economic Outlook As Restrictions Remain
The Palestinian economy will continue to suffer under Israeli border restrictions over the coming years as a peace deal remains off the
cards. Economic growth will prove insufficient to substantially improve living standards or reduce unemployment across the West Bank
and Gaza.
Chapter 2.2: 10-Year Forecast – West Bank & Gaza
The West Bank & Gaza Economy To 2026
Long-Term Growth Outlook Far Below Potential
We forecast steady, moderate real GDP growth in the West Bank and Gaza based on our assumption that Israeli restrictions on the
movement of goods and people into and out of the territories will not change significantly over our 10-year forecast period. These
hindrances will negatively impact gross fixed capital formation, exports, and government spending, leaving private consumption to
continue underpinning the economy going forward.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 2.3: Political Outlook – West Bank & Gaza
SWOT Analysis
Domestic Politics
Continued Palestinian Unrest Ahead, Despite Israeli Security Concessions
Although Israeli security structures at the al-Aqsa compound (Temple Mount) have been removed for now, unrest will remain elevated
across Jerusalem, the West Bank and Gaza in the quarters ahead as tensions between Palestinians and Israelis are fuelled by the
growing political and economic frustrations of the former, and the rising assertiveness of the latter's leadership.
Long-Term Political Outlook
Monumental Obstacles To Statehood
Over the next decade, the Palestinian territories will continue to face extremely challenging political obstacles, internally and externally.
We remain sceptical about the potential for a negotiated settlement or unilateral declaration of independence to bring peace and
stability.
Chapter 3: BMI Global Macro Outlook
As Good As It Gets?
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % Y-O-Y
TABLE: JORDAN – MACROECONOMIC DATA & FORECASTS
TABLE: WEST BANK AND GAZA – MACROECONOMIC DATA & FORECASTS

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