JORDAN’S $34bn economy is among the smallest in the Middle East, having insufficient supplies of water, oil, and other natural resources and is facing serious challenges since the outbreak of the Arab Spring uprisings in 2011.

Regional conflicts in Syria and Iraq continue to weigh on its economy as it tries to weather the number of external shocks. Its GDP is projected to grow by 3.8pc in 2015 and 4.5pc in 2016 against an estimated 3.5pc growth in 2014. According to the IMF, lower oil prices and further reforms could contribute to higher growth this year.

Jordan’s foreign exchange reserves reached more than $14bn last year, compared to $12bn in 2013. The IMF expects the reserves to rise to $17bn this year and $18bn in 2016. Jordanian exports last year increased by 7.5pc to $7.3bn compared to $6.7bn in 2013. The kingdom imported goods worth $22bn or 3.1pc higher than 2013.

The influx of Syrian refugees in Jordan has contributed the hike in demand for fuel and other essential goods, resulting in higher imports. There are 1.5m Syrian refugees in Jordan, almost 21pc of its population. This year only 29pc of the refugee budget is being covered by the international community while 70pc would be financed from domestic resources..

Rising demand for power and disruptions of gas supplies from Egypt have left Jordan struggling to meet its energy requirements. Primary demand continues to grow at an annual rate of around 5.5pc. Jordan currently imports around 97pc of its energy needs. Jordan has received less than a third of contracted gas supplies from Egypt since 2011, due to the repeated sabotage of the Arab Gas Pipeline.

Lower international oil prices have pushed down the cost of imported energy in recent months. Nonetheless, Jordan’s energy problems remain complex. Lower oil prices could also lead to a reduction in aid from GCC governments.

The EBRD is providing Jordan a $10m trade facility to Capital Bank Jordan under the Trade Facilitation Programme (TFP). Launched in 1999. The TFP facility is available for a wider range of trade finance products to its customers and for developing new products. The EBRD’s support will also allow CBJ to reach out to a broader range of companies engaged in cross-border trade.

A host of new initiatives has also been undertaken to reduce Jordan’s reliance on energy imports. The kingdom’s renewable electricity plans received a major boost last year when EBRD and the French Development Finance Institution, Proparco, agreed to provide loans up to $100m for solar energy projects. The government invited investors to build 100MW solar or wind plants, but the project could not be implemented as efforts to allocate GCC funding for distribution capacity constraints proved unsuccessful.

The kingdom now plans to expand the capacity of the national electricity grid by 1,000MW to around 5,300MW. New projects are expected to be commissioned within two years. Jordan has also moved to secure replacements for disrupted Egyptian gas supplies. A $65m LNG terminal, under construction at the port of Aqaba, is expected to allow the kingdom to diversify its gas imports by July.

Morocco

Morocco

Morocco has avoided the political upheavals and economic meltdowns that have plagued the other Arab countries in transition, and has now become a major player in the African economic affairs. Economic growth averaged 4.4pc between 2000 and 2013.

The economy maintained macroeconomic stability due to the strong policy actions implemented by the authorities in 2014. Although, growth slowed to below 3pc last year due to a contraction in agricultural activity following an exceptional 2013 crop and weak demand from Europe, it is expected to rebound to 4.5pc in 2015, according to the IMF.

The financial sector remains sound. The 2014 current account deficit narrowed to an estimated 5.8pc of GDP due to booming exports from newly developed sectors and lower oil prices. International reserves increased to above five months of imports and fiscal deficit narrowed to 4.9pc of GDP. Thedeficit should reduce to 4.3pc of GDP in 2015 and further to 3.5pc in 2016.

The economy grew by 4.4pc in the first quarter of 2015, contributed by 12.3pc increase in the agricultural value added. For the second quarter, the value added outside agriculture is expected to grow 3.3pc, while that of agriculture would increase by 12.9pc, which should lead to an overall economic growth of 4.6pc. Inflation remains low at 0.4pc on average but the unemployment rate increased to 9.9pc in 2014. After reaching peaks in 2012, both the fiscal and current account deficits have improved. .

The Moroccan economy showed resilience to external shocks in 2014.According to the Economy and Finance Minister, the economy is expected to grow 5pc in 2015 amid a sequence of positive indicators boosted by lower oil prices. The current account deficit is predicted to drop from 5.8pc to 4pc of GDP in 2015. In light of the ongoing reform process, the IMF expects the economic growth to accelerate, reaching the 5-5.5pc range while inflation is expected to remain low next year. But Morocco still remains most indebted among Arab and African countries. The kingdom’s debt-to-GDP ratio stands at 136pc of GDP.

The World Bank continues to encourage reform agenda. It recently announced a $200m loan to support Morocco’s competitiveness strategy and encourage reforms for productivity and growth. However, it still faces significant risks. According to the World Bank, a protracted period of slow growth in Europe, Morocco’s main trading partner, can result in lower exports, foreign direct investment, tourism, and remittances. A surge in global financial market volatility would also negatively impact the economy.

Published in Dawn, Economic & Business, April 27th, 2015

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