Model Essay

Economic and Social Developments in Jordan

Jordan is a middle-income country in the Middle East, widely recognized for its strategic location but limited natural resources. Over the past four years ($2019$–$2022$), Jordan has experienced modest economic growth, averaging around $2.3\%$ annually. The global downturn in recent years has affected critical sources of foreign exchange, such as tourism and remittances from Jordanian workers abroad, leading to fiscal pressures and higher-than-expected unemployment, which reached $22\%$ in $2022$.

Persistent challenges in the labor market, combined with rising living costs, mean that large segments of the population still live near or below the poverty line. In $2021$, the official poverty rate stood at approximately $14.2\%$, just below the rate of $15.7\%$ recorded in $2019$. Rural regions suffer from insufficient infrastructure, limited access to technology, and consistently lower educational attainment rates, creating conditions that some analysts describe as a “poverty trap”, whereby low-income communities struggle to break out of a cycle of low investment in human capital and persistently low productivity.

To address financial constraints, Jordan’s government negotiated extended support from international lenders and sought to stabilize its currency, the Jordanian dinar (JOD), which is maintained under a managed regime. By $2022$, official foreign exchange reserves stood at around US$16 billion, reflecting the central bank’s policy to maintain confidence in the fixed exchange rate. Economic policy also focuses on expanding Jordan’s export base beyond its traditional products, such as phosphates and potash. Agreements with neighboring countries, along with the removal of some administrative barriers, aim to facilitate trade in agricultural goods, manufactured items, and pharmaceuticals—major sources of export revenue for Jordan.

On the social policy front, Jordan spends a sizable portion of its budget on subsidizing staple foods (particularly bread) and fuel. However, critics argue that these subsidies benefit higher-income households more than the poorest citizens. In response, the government has piloted targeted cash transfers to low-income households, hoping to reduce the fiscal burden of universal subsidies. There is also a growing emphasis on developing human capital through expanding public education, as many experts link an improved schooling system to a more skilled workforce and higher long-term productivity.

Jordan’s leadership has reaffirmed efforts to alleviate poverty through microfinance initiatives, vocational training programs, and development projects focused on rural regions. Improvements in public transportation and digital connectivity are also on the policy agenda, aiming to enhance labor mobility and open new job opportunities. Yet, sustaining these programs depends on the government’s ability to manage a public debt that reached $90\%$ of GDP in $2022$, while also maintaining growth to boost government revenues.

While the dinar’s stability has generally fostered investor confidence, some economists suggest further currency flexibility may help make Jordan’s exports more competitive. Meanwhile, investment in the tourism sector is gradually rebounding, buoyed by the country’s historical attractions like Petra and Wadi Rum. Nonetheless, the sector remains vulnerable to external shocks and regional geopolitical developments.

Since $2020$, Jordan has officially recognized the need for a more equitable distribution of resources, aiming to narrow the Gini coefficient which was estimated at around $0.34$ in $2022$. Although this figure is relatively moderate, continued high unemployment could aggravate existing inequalities if growth does not become more inclusive. As Jordan looks ahead, balancing fiscal reforms with the need to protect the most vulnerable populations will remain a priority for policymakers who aspire to lower poverty rates and foster sustainable development.

Table 1: Selected Macroeconomic Indicators for Jordan ($2019$–$2022$)

Table 2: Jordan’s Major Exports and Imports ($2022$)

Note: Tourism and remittances serve as additional key sources of foreign currency but are not included in the above table.

(i) Using information from the text/data and your knowledge of economics, discuss the potential impact of gradually removing subsidies on staples (such as bread) and redirecting funds toward targeted cash transfers for Jordan’s economic growth and development.