Although it will recover in 2011-12, the economy will struggle in the face of limited government spending growth and the end of the construction boom, despite recently announced current spending rises following the January protests. In recent years, Jordan's growth rate has been lifted by a strong upturn in foreign direct investment, especially from the Gulf Arab states. However, with their spending being eroded by slower growth since the global economic downturn of 2008-09, inflows from the Gulf have dropped. Such flows are expected to recover by the end of the forecast period, although they could be affected by a possible decline in tourist arrivals, if the domestic and regional political situation worsens.

Exports will be constrained by sluggish growth in the US, but this should be partly offset by fast-rising demand for Jordanian goods from neighbouring Iraq, which will in turn boost activity at the Aqaba Container Terminal, currently undergoing relocation and development. Overall, we estimate that economic expansion reached 3.2% in 2010, and forecast that it will rise slightly in 2011, to 3.8%, as a number of Jordan's export markets begin to strengthen and domestic construction activity picks up again. Even though we forecast that real GDP growth will pick up later in the forecast period, with the economy expanding by an average of 4.7% in 2012-15, it will remain well below the stellar levels witnessed in the five years before the downturn. The difficult global economic situation and government spending cuts (albeit possibly deferred this year) are also likely to depress consumer confidence, although the effect of this should fade in the latter part of the forecast period.

Download the numbers in Excel