Jordan's economy is among the most open in the Middle East, with a sum of total trade flows estimated at 90% of GDP. To this must be added income from tourism, remittances from emigrants, FDI and donations from friendly countries. The main activityà trade that interests the country is the re-export of goods through the port of Aqaba, in particular to Iraq, Turkey and Lebanon. Potassium from the Dead Sea and phosphate deposits make an important contribution to exports, while hydrocarbon extraction activity is negligible and the country is penalized by a persistent energy deficit. Just for this reason Jordan has developed aeconomy based primarily on services, covering more than 65% of GDP. The most important, with reference to the contribution, are financial, real estate and business (with a weight of more than 20% of GDP), transport and communications (15% of GDP), and trade and tourism (11%). The weight of the manufacturing sector (food, building materials, refining, fertilizers, chemical-pharmaceuticals) approaches 20%.
After recording sustained growth rates in the decade 2000-09 (6,5% on average), in recent years the economy was penalized by external shocks, in particular by political tensions in the Middle East area, and in the four-year period 2010-13 average growth slowed down to 2,7%. As reported in focus Intesa Sanpaolo, date thehigh unemployment (11,8% in the first quarter of 2014), a substantial number of the working-age population seeks work abroad, so much so that the IMF has estimated a growth rate of 6,1% to be able to absorb the new workforce. Persistent political tensions in the region have hit the economy due to negative effects on trade channels to Iraq and Syria, on revenues from both Middle Eastern and European tourism, on FDI from Gulf countries and on the flow of energy. The Gulf countries employ large numbers of Jordanian migrant workers (for over 80% of remittances), absorb a significant share of Jordanian exports, invest substantial capital (about 80% of total FDI), feed about 40% of tourist flows to the country and they support the state budget with generous donations.
From this point of view, in fact, Jordan presents a high public deficit in relation to GDP with periodic financing problems partly met thanks to donations and guarantees on the bond issues of friendly Arab countries and the USA. In 2013 the state budget recorded a deficit equal to 5,5% of GDP, from 8,3% of the previous year, thanks to the doubling of revenues from donations (which reached 2,6% of GDP) and to the more limited expenditure on subsidies (dropped to 1,2% of GDP after the removal of the fuel price freeze). The burden for subsidies (and, consequently, the public deficit) is actually more substantial than what transpires from the state accounts, as the higher energy costs to power the generating plants are borne by the National Electricity Company (NEPCO) which sells electricity at rates below the cost of production. In this sense NoIn 2013, public debt (equal to 49,7% of GDP), including the part guaranteed by the state, exceeded 80%. The electricity company finances its deficit (equal to 3,8% of GDP in 2013) with theissuance of government-backed securities that have no effect on the public deficit but do impact on sovereign debt. In recent times the increase in the energy bill has made the maintenance of subsidies unsustainable and has led to a clear worsening of the current account deficit of the balance of payments and a substantial drain on reserves, calling on the Government to ask for financial support from the IMF. The improvement of the internal political situation and the rebuilding of currency reserves thanks to aid and loans from friendly countries and the IMF, which restored confidence in the stability of the exchange rate, together with the slowdown in inflation, allowed the Central Bank to implement three rate cuts starting last August, bringing the reference rate from 5% to the current 4,25%, 0,709%. Thanks to the fall in inflation, new, albeit small cuts are still likely. The Jordanian dinar has been pegged to the US dollar at a fixed exchange rate of JD 1:USD 1995 since October XNUMX.
Jordan's balance of payments has a large current account deficit due entirely to the trade account, while the services and transfers accounts report substantial surpluses (+5,2 billion) thanks, respectively, to income from tourism and remittances from migrant workers, without forgetting aid in the form of donations. Last year Jordan raised 1,25 billion through a Eurobond guaranteed by the USA, whereas a new 1bn guaranteed loan will be launched next July. At the end of February 2014, reserves reached a new high of 13,4 billion, a figure to be compared with an external financial requirement in 2014 estimated at 16 billion. In 2013, the current account of the Libra recorded a deficit of 3,4 billion dollars (10,6% of GDP), down from 4,7 billion in 2012. The trade deficit instead widened to 11,5 billion, from 10,6 billion in 2012, mainly due to the decline in potash exports.
Finally, given the large public and current deficits, Jordan must continue to rely on large financial flows from abroad. On the economy, small but very open, the lack of energy resources and excessive vulnerability weigh above allà to external political and economic developments, especially in the Gulf countries. And although the political-institutional framework seems to run less risk of upheaval than in many neighboring countries, the greater economic and political risks led the rating agencies to cut the rating between May and June 2013 sovereign debt rating in Jordanian currency (now BB- for S&P's and B1 for Moody's).
