Amman — As Jordan grapples with the economic fallout from the COVID-19 pandemic, the Israeli offensive in Gaza has added another layer of challenge to an already fragile economy. According to Jordan's Ministry of Finance, the nation struggles with a 22.3% unemployment rate while grappling with public debt surpassing $56 billion, amounting to 114% of the country's Gross Domestic Product (GDP).
A United Nations study conducted by the United Nations Development Programme (UNDP) indicates that the economic cost of the conflict between Israel and the Islamic Resistance Movement (Hamas) in Gaza on neighboring Arab states, including Jordan, Egypt, and Lebanon, could escalate to at least $10 billion this year. It could push more than 230,000 people into poverty, with effects potentially doubling should the conflict persist for another six months.
Abdallah Al Dardari, the UN Assistant Secretary-General and Director of the UNDP Regional Bureau for Arab States, who led the study, told Reuters, “This is a massive impact.” He added, “The crisis was like a bomb in an already fragile regional situation… Morale is strained due to fear, what might happen, and where things are heading.”
Post-October 7 is not as before
In Jordan, King Abdullah II recently emphasized the importance of cooperation between the public and private sectors to adapt to the post-war economic conditions. He noted that the economy after October 7, 2023, will never be the same as before due to the impact of the Gaza conflict.
Indicators show that Jordan's economy has begun to pay the price of the war across several vital economic sectors, including tourism, which witnessed an estimated 50% cancellation of tourist reservations to date. This directly affects treasury revenues, with the tourism sector contributing approximately 15% of the GDP (4.8 billion Jordanian dinars annually).
Beyond tourism, the conflict has impacted various economic sectors in the country. The inputs of investment and production processes have been affected due to increased costs, influencing production lines, exports, imports, and other negative indicators.
These developments are constraining Jordanian industries' competitive capabilities. With rising shipping and insurance costs through the Port of Aqaba on the Red Sea — Jordan's only maritime outlet — it is anticipated to create a negative investment environment. This is expected to ultimately lower the industrial sector's contribution to the GDP from 25% to 17%, as projected by the specialist author Haider Al Majali in a recent article in the "Jordan Times."
Tourism Sector Hardest Hit
Jordanian economic expert Muhannad Arikat, Chief Analyst at "CFI" company, told Al Jazeera Net, “Many economic sectors in Jordan have been affected by the Gaza war, including services, trade, tourism, restaurants, and transportation.”
Jordanian economic expert Muhannad Arikat confirms that important economic sectors have been impacted by the ongoing war on Gaza (Al Jazeera)
Arikat confirmed that "the Jordanian tourism sector suffered the most, with the Jordanian minister of tourism citing that the conflict has either fully or partially impacted the work of 57,000 Jordanians in the sector. This has been reflected in hotel bookings and travel agency reservations, with a 50% cancellation rate according to the Jordan Hotel Association. Additionally, real estate sales in the country have decreased by 20% due to regional uncertainty, while demand for tourist sites has dropped by 40%, and restaurant bookings have plummeted by 60-70% since the war's onset."
He added that many Jordanians now face unemployment due to job losses from boycott campaigns against Western restaurants and products, especially as 70% of Jordan's total consumption comes from imported goods rather than local production. This has caused a significant decrease in citizens' spending and government tax revenue, with the war's progress impacting Jordanians' consumption behavior, as they become more cautious, preferring to save rather than spend or invest.
Nour Al Masri, a brokerage manager in the Amman financial market and owner of a private employment company, said to Al Jazeera Net, "The war in Gaza has created instability undermining the foundations of investment and economic growth, leading to a decline in both new project creations and expansions of existing ones. In some cases, it has prompted projects to move outside the country, resulting in lower cash flows and higher unemployment rates.”
Al Masri says the war in Gaza has led to instability, causing a decline in the establishment of new projects (Al Jazeera)
Masri added, "The war has also created unsafe maritime conditions in the Red Sea, disrupting many trade operations reliant on import and export due to increased freight rates and insurance costs for goods, which has impacted the local market by escalating prices and inflation."
On the issue of rising unemployment rates, especially among youth, Masri explained, "Due to the close ties between the Jordanian and Palestinian people, a widespread voluntary grassroots boycott movement emerged against foreign brands and goods supporting the Israeli occupation, significantly reducing these companies' profits. They had to lay off many Jordanian workers, which led to an increased unemployment rate among the youth."
Positive Impacts
However, Masri pointed out, "the boycott had positive effects on the Jordanian industry, especially in the food sector, as Jordanians turned to local products as an alternative to the boycotted foreign goods. This trend seems to continue even after the war ends, indicating a general awareness of the importance of supporting local products over foreign ones, particularly those global brands known for backing the Zionist entity."
Protest calling for the boycott of American goods (Al Jazeera)
Masri also anticipated other positive effects on the Jordanian economy, especially post-war during the reconstruction of the Gaza Strip, predicting strong Jordanian participation in reconstruction projects due to geographical proximity and close economic ties between Jordan and Palestine. This will positively reflect on revitalizing the construction sector and industries related to steel, cement, and other building process inputs and outputs.
Successive Shocks
Jordanian Finance Minister Mohammed Al-Ississ stated during the general budget speech for the fiscal year 2024 before the House of Representatives that Jordan "managed to overcome many global and regional economic crises and absorb a large part of the shocks due to political and social stability and robust foundations supporting its economy."
Al-Ississ anticipated the economy would register a near 2.6% real growth. The Jordanian government expects to generate public revenues of about $14 billion in 2024, an increase of roughly 8.9% from 2023, along with a rise in foreign grants to over $1 billion, and a forecasted decrease in the total public debt to 88% of GDP.
The 2024 budget projects a deficit of $1.143 billion compared to a $2.625 billion deficit for the previous year.
