The war in Gaza, which erupted on October 7, 2023, has left a trail of devastation and suffering for the people of Palestine and the region.
The war has also had significant repercussions for the economy of Jordan, which shares historical, cultural, and political ties with Palestine. In this article, we will examine the main effects of the war on Jordan’s economy and the possible solutions that can help the country overcome the challenges and restore its economic stability and growth.
The main effects of the war on Jordan’s economy
According to the Jordanian Ministry of Planning and International Cooperation, the war in Gaza has cost the Jordanian economy around 1.5 billion Jordanian dinars (about 2.1 billion US dollars) in direct and indirect losses. These losses stem from various factors, such as:
- The decline in tourism and foreign direct investment: Jordan is a popular tourist destination in the region, attracting millions of visitors every year who come to enjoy its historical and natural attractions. However, the war in Gaza has deterred many tourists from visiting Jordan, especially from Europe and North America, due to security concerns and travel restrictions. This has resulted in a sharp drop in tourism revenues, which account for about 12 percent of Jordan’s GDP. Similarly, the war has also discouraged foreign investors from entering or expanding their businesses in Jordan, due to the uncertainty and instability in the region. This has reduced the inflow of foreign direct investment, which is a vital source of capital and technology for Jordan’s economy.
- The humanitarian and social crisis in Gaza and the West Bank: Jordan has a large Palestinian population, estimated at around 2.2 million people, who make up about 20 percent of the country’s total population. Many of them have relatives and friends in Gaza and the West Bank, who have been affected by the war. Jordan has also received thousands of refugees and displaced people from Gaza, who have fled the violence and sought shelter in the country. Jordan has provided humanitarian assistance and support to these people, but this has also put a strain on its limited resources and public services, such as health, education, and housing. Moreover, the war has also increased the social and psychological distress among the Jordanian people, especially the youth, who have witnessed the atrocities and injustices committed against their Palestinian brothers and sisters. This has led to increased frustration, anger, and resentment, which could potentially fuel social unrest and violence in the country.
- The disruption of trade and economic cooperation: Jordan has strong trade and economic ties with Palestine, especially with the Gaza Strip and the West Bank, which are its main export markets in the region. Jordan exports various goods and services to Palestine, such as agricultural products, pharmaceuticals, textiles, and construction materials. Jordan also imports some goods from Palestine, such as fruits, vegetables, and fish. However, the war in Gaza has disrupted the movement of goods and people across the borders, due to the closure of crossings, the destruction of infrastructure, and the imposition of restrictions and obstacles by the Israeli authorities. This has affected the trade volume and value between the two countries, which has negatively impacted the income and employment of many Jordanian businesses and workers.
- The decline in confidence and growth prospects: The war in Gaza has also had a psychological impact on the Jordanian economy, as it has eroded the confidence and optimism of the economic actors, such as consumers, producers, and investors. The war has created a sense of fear and uncertainty about the future of the region and the prospects of peace and stability. This has reduced the demand for goods and services, the supply of production factors, and the willingness to invest and innovate. This has also lowered the expectations of economic growth and development, which has further dampened the economic activity and performance.
The sectoral effects of the war on Jordan’s economy
The war in Gaza has also had a differential impact on various sectors of the Jordanian economy, depending on their exposure and vulnerability to the external shocks and disturbances. Some of the most affected sectors are:
- The tourism sector: The tourism sector is one of the most directly and severely affected sectors by the war in Gaza, as it relies heavily on the inflow of foreign tourists and visitors to the country. The tourism forecast predicts that the number of foreign tourists to the region will decrease by about 50 per cent, due to the cancellation of bookings and the avoidance of travel to the region. This means that the treasury’s tourism revenues, which constitute 14-15 per cent of the GDP (about 4.8 billion dinars annually), will witness a significant decline, which will create an additional pressure on growth rates in the coming year. It is likely that the tourism sector’s contribution to the GDP will also be reduced to low levels, which will affect the income and employment of many people who work in this sector, such as hoteliers, guides, drivers, and restaurateurs.
- The trade and transport sector: The trade and transport sector is another sector that is heavily affected by the war in Gaza, as it depends on the smooth and uninterrupted movement of goods and people across the borders and within the region. The war in Gaza has caused disruptions and delays in the trade and transport networks, due to the damage to the infrastructure, the closure of the crossings, and the increase in the security and logistical costs. This has complicated the economic scene and made it difficult for individuals and companies to conduct their business and trade activities. In line with the general trend, it is expected that the GDP contribution of this sector will decline from 7.5 per cent to 5.2 per cent, which will affect the income and employment of many people who work in this sector, such as traders, exporters, importers, and transporters.
- The food security sector: The food security sector is also a sector that is potentially affected by the war in Gaza, as it relates to the availability and accessibility of food for the population. Despite Jordan occupying a good position in the Global Hunger Index for 2022 as a food-secure state, it may nonetheless face difficulties in meeting local food needs in the coming period, due to the disruption of the supply chains and the increase in the prices of food commodities. Therefore, it is essential to work to increase food reserves and follow a government policy that supports the agricultural sector to bridge the expected gap in the food security system. This will ensure that the population has access to sufficient and nutritious food, and that the food security sector maintains its contribution to the GDP, which is about 4 per cent.
The possible solutions to mitigate the impact of the war
In order to cope with the economic challenges posed by the war in Gaza, the Jordanian government and the private sector have taken several measures and initiatives, such as:
- Seeking external assistance and support: Jordan has appealed to the international community, especially its allies and partners, to provide financial and technical assistance and support to help the country deal with the economic and humanitarian consequences of the war. Jordan has received pledges and donations from various countries and organizations, such as the United States, the European Union, the Gulf Cooperation Council, the World Bank, and the United Nations. These funds and resources have been used to cover some of the budget deficit, to finance some of the development projects, and to provide relief and aid to the affected people.
- Enhancing regional and international cooperation: Jordan has also sought to enhance its regional and international cooperation and integration, in order to diversify its markets and sources of income, and to increase its resilience and competitiveness. Jordan has signed several agreements and memoranda of understanding with various countries and blocs, such as Iraq, Egypt, Turkey, China, Russia, and the African Union. These agreements aim to boost trade, investment, energy, transport, and tourism between Jordan and these countries and regions, and to create new opportunities and benefits for the Jordanian economy.
- Reforming and stimulating the domestic economy: Jordan has also embarked on a series of reforms and stimulus measures to improve the efficiency and productivity of the domestic economy, and to create a more conducive and attractive environment for business and investment. These reforms and measures include reducing taxes and fees, simplifying procedures and regulations, enhancing transparency and accountability, supporting small and medium enterprises, promoting innovation and technology, and empowering women and youth. These reforms and measures aim to increase the income and employment of the Jordanian people, and to enhance the quality and competitiveness of the Jordanian products and services.
- Protecting investments, supporting businesses and companies, and improving and facilitating the business environment: These are some of the specific measures that the government must adopt to protect the existing investments and businesses in the country, and to encourage new ones to enter or expand in the market. These measures include providing guarantees, incentives, subsidies, exemptions, and facilities to the investors and business owners, especially those who operate in the most affected sectors, such as tourism, trade, and transport. These measures also include simplifying and streamlining the administrative and legal procedures and requirements for starting and running a business, and removing any barriers or obstacles that hinder the business activity and performance.
- Stimulating creativity and flexibility by developing distinctive tourism programmes that respond to new challenges, promoting international and regional trade, and promoting innovation and entrepreneurship: These are some of the measures that the private sector must adopt to cope with the changing and challenging market conditions, and to create a competitive edge and a distinctive value proposition for their products and services. These measures include developing and offering new and innovative tourism programs and packages that cater to the different needs and preferences of the potential tourists, such as cultural, religious, medical, or adventure tourism. These measures also include exploring and expanding the trade and export opportunities and markets, especially in the emerging and growing regions, such as Africa and Asia. These measures also include promoting innovation and entrepreneurship, by encouraging and supporting the creation and development of new and original ideas, products, and services, that can solve the problems and meet the demands of the customers, and that can rely on alternative and renewable sources of energy, such as solar and wind power.
The role of the King and the government in leading the economic recovery
In his meeting with the representatives of the public and private sectors, his Majesty King Abdullah stressed the upcoming economic events and cemented his views on the importance of cooperation with the government to develop sound strategic plans and form specialized task teams capable of diagnosing the dimensions of the Gaza war crisis and its impact on the national economy. He explained that due to the effects of the war, the Jordanian economy after October 7, 2023, will not be the same as it was prior. He also stressed the importance of cooperation and coordination between all productive sectors to help the Jordanian economy overcome this anticipated economic depression. He cited that Jordan has always managed to overcome regional and global crises that posed a great danger to it, it emerged from them with strength and effectiveness, proving to the world the depth and resilience of its economy.
It is in the Jordanian national interest to protect the economy and support it. This target requires the cooperation of all economic sectors, with their two axes, the organizational and productive, to develop plans that enable the Jordanian economy to compete and stand firm when facing these challenges, such as benefiting from the community boycott of products that support the Israeli enemy in providing alternative national products that contribute to covering the shortage in the boycotted products and help to reduce the qualitative gap between the local and foreign product.
The government, under the leadership of Prime Minister Bisher Al-Khasawneh, has also taken a proactive and responsible role in addressing the economic challenges and implementing the necessary reforms and measures to mitigate the impact of the war. The government has adopted a comprehensive and integrated economic recovery plan, which covers various aspects and dimensions of the economic situation, such as fiscal, monetary, trade, investment, and social policies. The government has also coordinated and communicated with the private sector and the civil society, to ensure their participation and contribution to the economic recovery process, and to listen to their feedback and suggestions.
The government has also expressed its commitment and determination to continue the economic reform process, which aims to enhance the efficiency, transparency, and accountability of the public sector, and to create a more conducive and attractive environment for the private sector and the foreign investors. The government has also pledged to maintain the macroeconomic stability and the fiscal discipline, and to ensure the sustainability and solvency of the public debt and the balance of payments. The government has also vowed to protect the social safety net and the living standards of the vulnerable and low-income groups, and to provide them with the necessary support and assistance.
Conclusion
The war in Gaza has had a severe and negative impact on the Jordanian economy, affecting various sectors and indicators, such as tourism, trade, investment, growth, and employment. However, Jordan has also shown its resilience and determination to overcome the challenges and to restore its economic stability and growth. Jordan has taken several steps and actions to mitigate the impact of the war, such as seeking external assistance and support, enhancing regional and international cooperation, reforming and stimulating the domestic economy, protecting investments, supporting businesses and companies, improving and facilitating the business environment, stimulating creativity and flexibility, developing distinctive tourism programs, promoting international and regional trade, and promoting innovation and entrepreneurship. These steps and actions have helped the country to cope with the situation and to prepare for the post-war recovery and development.
Jordan hopes that the war in Gaza will end soon, and that a just and lasting peace will prevail in the region, which will enable the countries and peoples of the region to enjoy security, prosperity, and dignity.
