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World > Middle East > Jordan > Economy (Notes)

Jordan - Economy (Notes)


ECONOMY
Jordan is a small country with limited natural resources. The country is currently exploring ways to expand its limited water supply and use its existing water resources more efficiently, including through regional cooperation. Jordan also depends on external sources for the majority of its energy requirements. During the 1990s, its crude petroleum needs were met through imports from neighboring Iraq. Since early 2003, oil has been provided by some Gulf Cooperation Council member countries. In addition, a natural gas pipeline from Egypt to Jordan through the southern port city of Aqaba is now operational. The pipeline has reached northern Jordan and construction to connect it to Syria and beyond is underway.

Under King Abdullah, Jordan has undertaken a program of economic reform. The government has taken the initiative to gradually eliminate fuel subsidies, pass legislation targeting corruption, and begin tax reform. It has also worked to liberalize trade, gaining access to the World Trade Organization (WTO) in 2000, signing an Association Agreement with the European Union (EU) in 2001, and securing the first bilateral Free Trade Agreement between the U.S. and an Arab country in 2001. Since 2000, exports of light manufactured products, principally textiles and garments manufactured in the Qualifying Industrial Zones (QIZ) that enter the United States tariff and quota free, have been driving economic growth. Jordan exported $6.9 million in goods to the U.S. in 1997, when two-way trade was $395 million; according to the U.S. International Trade Commission, it exported $1.42 billion in 2006, with two-way trade at $2.07 billion.

The Free Trade Agreement (FTA) with the United States that went into effect in December 2001 will phase out duties on nearly all goods and services by 2010. The agreement also provides for more open markets in communications, construction, finance, health, transportation, and services, as well as strict application of international standards for the protection of intellectual property. In 1996, Jordan and the United States signed a civil aviation agreement that provides for 'open skies' between the two countries, and a U.S.-Jordan treaty for the protection and encouragement of bilateral investment entered into force in 2003. More information on the FTA is available on www.jordanusfta.com.

Such developments hold considerable promise for diversifying Jordan's economy away from its traditional reliance on exports of phosphates and potash, overseas remittances, and foreign aid. The government has emphasized the information technology (IT) and tourism sectors as other promising growth sectors. The low tax and low regulation Aqaba Special Economic Zone (ASEZ) is considered a model of a government-provided framework for private sector-led economic growth.

Jordan is classified by the World Bank as a 'lower middle income country.' The per capita GDP, as reported by the International Monetary Fund (IMF), was $2,533 for 2006. According to Jordan's Department of Statistics, 13% of the economically active Jordanian population residing in Jordan was unemployed in 2006. Education and literacy rates and measures of social well-being are relatively high compared to other countries with similar incomes. Jordan's population growth rate has declined in recent years and is currently 2.3% as reported by the Jordanian government. One of the most important factors in the government's efforts to improve the well-being of its citizens is the macroeconomic stability that has been achieved since the 1990s. The rate of inflation in 2006 was 6.3%; the currency has been stable with an exchange rate fixed to the U.S. dollar since 1995 at JD 0.708-0.710 to the dollar. In 2006, Jordan significantly reduced its debt to GDP ratio to 73.2% of GDP.

While pursuing economic reform and increased trade, Jordan's economy will continue to be vulnerable to external shocks and regional unrest. Without calm in the region, economic growth seems destined to stay below its potential.


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Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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