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