Jordan

Chapter 3. The Economy

Mosaic of a man carrying a basket of grapes from the Byzantine Church of Saint Lots and Saint Prokopius, Khirbat al Muhayyat, ca. 550

JORDAN, A SMALL NATION with a small population and sparse natural resources, has long been known by its Arab neighbors as their "poor cousin." In the late 1980s, Jordan was compelled to import not only many capital and consumer goods but also such vital commodities as fuel and food. Officials even discussed the possibility of importing water. Nevertheless, the Jordanian economy flourished in the 1970s as the gross domestic product (GDP--see Glossary) enjoyed double-digit growth. The economy continued to fare well in the early 1980s, despite a recessionary regional environment. Indeed, by the late 1980s, Jordanians had become measurably more affluent than many of their Arab neighbors. The 1988 per capita GDP of approximately US$2,000 placed Jordan's citizens well within the world's upper-middle income bracket.

Economic prosperity rested on three primary bases. Jordan's status as the world's third largest producer of phosphates ensured a steady--if relatively modest--flow of export income that offset some of its high import bills. More important, Jordan received billions of dollars of invisible or unearned income in the form of inflows of foreign aid and remittances from expatriates. These financial inflows permitted domestic consumption to outpace production and caused the gross national product (GNP--see Glossary) to exceed the GDP. In the late 1970s and early 1980s, GNP exceeded GDP by 10 percent to 25 percent. High financial inflows from the mid-1970s to the mid-1980s allowed Jordan to maintain a low current account deficit; in some years it registered a current account surplus, without much external borrowing and despite trade and budget deficits. Jordan's economy, therefore, demonstrated many of the characteristics of wealthier and more technologically advanced rentier economies. Jordan also capitalized on its strategic geographic location, its educated work force, and its free enterprise economy to become a regional entrepôt and transit point for exports and imports between Western Europe and the Middle East. Because of these factors, it also became a magnet for foreign direct investment, and a purveyor of banking, insurance, and consulting services to foreign clients. Jordan's heritage as a merchant middleman was centuries-old, dating back to the Nabatean kingdom of Petra. Because the economy depended so heavily on the professional service sector and remittance income from expatriates, the government sometimes called Jordan's manpower the nation's most valuable resource.

Jordan's economic strategy succeeded during the Middle East oil boom of the 1970s. In the late 1980s, however, as the worldwide plunge in oil prices persisted, economic problems emerged. Foreign aid was cut, remittances declined, and regional trade and transit activity was suppressed by lack of demand, leading to a deterioration in the current account. The government was deeply concerned about the economy's vulnerability to external forces. Jordan's economy depended heavily on imported commodities and foreign aid, trade, investment, and income. But because plans to increase self-sufficiency were only in the early stages of implementation, a short-term decline in the national standard of living and increased indebtedness loomed as the 1990s approached; observers forecast that austerity would replace prosperity.

Data as of December 1989

Jordan - TABLE OF CONTENTS