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Jordan and the West Bank and Gaza Country Risk Report Q2 2016

Jordan and the West Bank and Gaza Country Risk Report Q2 2016

Core Views Jordan's political risk profile remains intrinsically connected to the region's security outlook. Threats to the country's stability will remain elevated as long as the fighting in Syria and Iraq continues. Domestically, high youth unemployment and the government's uncompromising approach towards the Jordanian Islamist opposition raise longer-term risks, with this trend exacerbated by the large influx of Syrian refugees in the country. We are more positive towards the Jordanian economy than at any point since 2010, with lower oil prices and signs of progress on the government's infrastructure investments set to boost economic activity throughout 2016. We forecast real GDP growth of 3.0% in 2016, compared to an annual average of 2.7% between 2010 and 2013. Jordan's twin deficits – in the budget and current accounts – will narrow over the coming years, to 2.6% and 2.5% of GDP respectively in 2018. The EU offering an enhanced trade agreement, lower oil prices, progress towards energy diversification and government efforts to increase revenues will drive these improvements. Given the very slow progress made by the Iraqi Defence Forces and the Syrian army in Iraq and Syria against radical jihadist group Islamic State (IS) and other opposition movements, the security risks confronting Jordan are set to remain prominent over the coming years. Core Views International recognition of a Palestinian state is gathering momentum, a trend that will continue over the next decade and deepen Israel's diplomatic isolation. However, actual statehood remains a far-off prospect. The dissolution of the Palestinian unity government in June 2015, followed by President Mahmoud Abbas' resignation from the chairmanship of his political faction in August, points to a growing governance vacuum in the West Bank and Gaza. The risk of a comprehensive collapse of the Palestinian political system is increasing, amidst a stagnating economy and the multitude of challenges confronting the Palestinian leadership. Tensions between the rival Palestinian factions will remain high, preventing the reconstruction of the Gaza Strip and fuelling political instability. Elevated political risks, a continued decline in competitiveness and an overreliance on debt amidst shrinking donor disbursements all present constraints to the Palestinian territories' economic outlook. In our baseline scenario, which assumes no major change to the political situation, growth will reach 3.6% this year, compared to an annualised 5.7% between 2010 and 2014. Israeli-Palestinian peace talks resumed in August 2013, but failed to progress past their April 2014 deadline. We retain our view that, despite efforts by US Secretary of State John Kerry, the current political configuration in Israel, combined with the increasing fragmentation of the Palestinian governance system, will hinder any progress in negotiations.


BMI Index
BMI Risk Index – Jordan
BMI Risk Index – West Bank & Gaza
BMI Index League Tables
Executive Summary – Jordan
Core Views
Key Risks
Chapter 1.1: Economic Outlook – Jordan
SWOT Analysis
Economic Growth Outlook
EU Response To Refugee Crisis To Increase Economy's Resilience
TABLE: SELECTED FTAS AND FTA NEGOTIATIONS
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 Expansion Bodes Well For Power Sector
Structural Fiscal Position
TABLE: CENTRAL GOVERNMENT REVENUES AND EXPENDITURE, 2014
External Trade And Investment Outlook
Falling Grants And Aid, Current Deficit Account Narrowing
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Monetary Policy
Following The Fed's Monetary Tightening With A Lag
TABLE: BREAKDOWN OF IMPORTS IN 2014
TABLE: BREAKDOWN OF EXPORTS IN 2014
Monetary Policy Framework
Chapter 1.2: 10-Year Forecast – Jordan
The Jordanian Economy To 2025
Expanding Private Sector Offers Strong Potential
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 1.3: Political Outlook – Jordan
SWOT Analysis
Domestic Politics
Refugee Crisis To Impact Stability, Not Fiscal Outlook
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Further Reforms On The Horizon?
Chapter 1.4: Operational Risk – Jordan
SWOT Analysis
Executive Summary – West Bank & Gaza
Core Views
Key Risks
Chapter 2.1: Economic Outlook – West Bank & Gaza
SWOT Analysis
Economic Growth Outlook
Moribund Economic Outlook Amidst Strong Constraints
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: COMPONENTS OF GDP (% OF TOTAL)
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Chapter 2.2: 10-Year Forecast – West Bank & Gaza
The West Bank & Gaza Economy To 2025
Long-Term Growth Outlook Far Below Potential
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 2.3: Political Outlook – West Bank & Gaza
SWOT Analysis
Domestic Politics
Peace Process Stranded Until At Least 2017
Long-Term Political Outlook
Monumental Obstacles To Statehood
Chapter 3: BMI Global Macro Outlook
Global Macro Outlook
Tail Risks Mounting Amid Sub-Par Growth
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: JORDAN – MACROECONOMIC DATA & FORECASTS
TABLE: WEST BANK AND GAZA – MACROECONOMIC DATA & FORECASTS

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