Jordan

Geopolitical headwinds weigh on growth outlook

Amid heightened regional tensions related to the conflict in Iran, Jordan’s economic growth is expected to slow in 2026. Elevated geopolitical risks will likely impact investor sentiment, tourism inflows (which account for 10-12% of GDP), and trade activity. The tourism sector, which is a critical source of foreign exchange, employment and service sector activity, is expected to come under pressure as geopolitical tensions weigh on travel demand. This would limit its contribution to growth and increase Jordan’s reliance on external financing at a time when fiscal and external imbalances remain high.

Inflation is expected to remain relatively contained in 2026, though with upside risks stemming from regional geopolitical tensions. An Iran-related conflict is likely to generate a supply-side shock, particularly through higher energy, transportation, and food costs. Rising global oil prices will likely increase domestic fuel costs, and higher shipping costs and logistical bottlenecks could lead to broader price increases. Additionally, Jordan's heavy reliance on imported food and agricultural supplies makes it susceptible to fluctuations in global commodity prices, particularly for grains, vegetable oils and fertilizers. A decline in real incomes, coupled with a high unemployment rate of around 21%, and a tighter-than-expected monetary policy (in line with the US Fed) would weigh on the contribution of private consumption to GDP.

Pressures build on fiscal and external outlook

Jordan’s fiscal position is expected to remain under strain due to weaker economic activity and a slowdown in tourism, which will negatively impact revenue collection. Meanwhile, expenditure pressures are expected to persist. Much of the spending is difficult to adjust in the short term due to rigidity in public sector wages, interest payments and social transfers. Meanwhile, higher energy costs and the need to sustain social support will likely damp fiscal consolidation efforts, keeping borrowing needs high and public debt on an upward trajectory. Continued support from international partners is expected to provide some cushion, but fiscal buffers are limited, which increases vulnerability to external shocks. The IMF program is on track, with around USD 200 million in disbursements in April 2026.

Pressures from outside the country are likely to intensify due to higher global energy prices, weaker tourism revenues and lower remittance inflows. These factors will likely cause the current account deficit to widen. Although remittances remain a key source of foreign exchange for Jordan (around 7-8% of GDP), inflows are expected to weaken in 2026 due to slower economic activity caused by security issues. At the same time, the country’s structural dependence on imports and its limited ability to reduce demand will hamper its ability to adjust. Disruption to regional trade routes, including potential risks to Red Sea shipping, could further impact trade volumes and increase logistics costs. Given Jordan’s reliance on Aqaba, its only seaport, any disruption to Red Sea shipping routes would greatly affect trade flows, import costs and external balances. Consequently, external balances are expected to deteriorate, reinforcing Jordan’s reliance on sustained financing to maintain macroeconomic stability.

Building geopolitical pressures

Although Jordan’s domestic political environment remains relatively stable, underlying socioeconomic pressures continue to pose risks. High unemployment, particularly among young people, combined with weak income growth and rising living costs, increases the potential for social unrest. The government’s limited fiscal space restricts its ability to protect households from economic shocks. This makes policy adjustments, such as subsidy reforms (e.g., reducing the fiscal burden of energy and food subsidies), politically sensitive, as they would directly increase living costs and risk triggering public dissatisfaction. Additionally, structural challenges, including governance inefficiency and perceptions of corruption, may impede the pace of reforms and undermine investor confidence. Although institutional stability is likely to persist, these factors indicate a fragile equilibrium that could be threatened by further economic deterioration.

The country is highly exposed to regional geopolitical developments due to its strategic location. Escalating tension related to the conflict in Iran pose significant risks to tourism, investor confidence and trade, as they increase security risks and regional instability. Although continued support from international partners is anticipated, shifting geopolitical priorities could impact the scope and terms of external assistance and introduce an additional layer of uncertainty to the outlook.

Last updated: May 2026