Jordans economy has managed to survive the political uprisings and conflicts in neighbouring countries due to a combination of external funding and economic policy reforms. The Washington-based IMF forecasts that GDP growth will speed up by 0.7 percentage points to reach 3.8 per cent in 2015 as a result of a moderation in international fuel and food costs.
After strong GDP growth of, on average, 6.5 per cent a year during 2000-09, the growth rate fell sharply to 2.3 per cent in 2010 as a result of the global financial crisis. The conflict in neighbouring Syria, which has led to more than 1 million refugees entering the Hashemite kingdom since 2011, and sizeable losses from the countrys electricity provider, National Electric Power Company (Nepco), prevented Jordan from recapturing the high growth levels seen in the first decade of the 2000s.
The introduction of economic reforms, such as reducing subsidies on electricity, and foreign grants has enabled Jordan to resume the path to economic growth. However, it is important the government keeps moving ahead with change if it is to maintain this success, particularly as conflicts in neighbouring Syria and Iraq show no signs of abating.
A major factor behind Jordans economic growth has been Ammans ability to attract support from Arab states, particularly GCC countries. In 2012, the GCC pledged $5bn in loans and grants to assist with Jordans development and economic reform process. This has been followed by agreements from the Kuwaiti government to provide loans worth a total of $695m for major infrastructure schemes, including projects in the water and renewable energy sectors.
In early 2012, the Abu Dhabi Fund for Development agreed to regulate $1.3bn-worth of grants from the UAE to Jordans central bank for financing water, sanitation, education and transport schemes, among others.
While the GCC has been the biggest lender, Amman is receiving significant support from further afield. In 2013, under an initiative launched by US President Barack Obama, Jordan issued a $1.3bn US-backed eurobond with a seven-year term and modest interest of 2.5 per cent. In June 2014, the US government guaranteed a $1bn sovereign bond with a coupon rate of less than 2 per cent.
The IMF, meanwhile, agreed in 2013 to back Ammans reform initiatives with a $2bn stand-by agreement over a period of three years. The international support has resulted in useable foreign currency reserves picking up significantly, rising from $5.3bn in 2012 to $11.4bn in 2013. The IMF estimates they could reach $15.2bn by 2018.
One of the most important changes implemented by Amman was the reform of energy and electricity tariffs, which were accounting for sizeable losses every year. In November 2012, the government increased fuel prices, despite widespread protests, and electricity tariffs have been increased for residential users three times since May 2012.
As a result, Nepcos losses are estimated to have reduced from JD1.2bn ($1.7bn) in 2012 to JD1bn in 2014, and the IMF believes losses could be eradicated by 2017 if the reforms continue.
Jordan is also moving ahead with plans to boost energy security. Inconsistent gas supplies from Egypt following that countrys 2011 revolution have resulted in Ammans fuel bill growing by an annual average of 19.2 per cent between 2010 and 2013, compared with an average of 3.4 per cent between 2006 and 2009.
According to data from the Ministry of Energy & Mineral Resources (MEMR), the cost of consumed energy in Jordan grew from $2.6bn in 2010 to $4.6bn in 2012, a hike of 43 per cent.
As a result, the government is pushing ahead with renewables schemes to reduce its vulnerability to gas supplies. Several developers have reached financial close this year for solar energy projects under the first phase of the states feed-in tariff programme, for which power-purchase agreements were signed with 12 developers in June 2014. The total investment for the solar plants will reach about $560m. In May 2015, the MEMR received bids for the second round of the programme.
Jordan is also making progress with plans to develop nuclear power. On 24 March 2015, the Jordan Atomic Energy Commission signed an intergovernmental agreement with Russian state-run nuclear company Rosatom. The agreement outlines the legal and political framework for developing nuclear power in Jordan, and sets the ball rolling for the construction of two nuclear power reactors with a total capacity of 2,000MW at a cost of $10bn.
With Jordans tourism sector, traditionally a significant contributor to the countrys economy, set to remain subdued as result of the continued regional unrest, it is imperative that Amman is able to continue with structural reforms to ensure its economy remains robust and achieves further growth.