S&P views Jordan's economy as stable despite USAID cuts and regional security risks

Ratings agency maintains the country's long-term sovereign credit rating at BB-

Workers at Jordan Chalk in Karak, south of Amman. The kingdom is trying to overhaul its economy as unemployment rises. AFP

Jordan's economy has remained resilient amid regional security risks and being cut off from United States Agency for International Development assistance, resulting in a stable outlook for the aid-reliant economy, ratings agency S&P Global has said.

The kingdom's long-term foreign and local currency sovereign credit rating was maintained at BB-, the New York-based firm said on Friday.

A BB- rating is “non-investment grade speculative”, three levels below investment grade, according to S&P's scale. Non-investment grade makes it more difficult for a country to access capital markets and raise funding when it wants to borrow.

“Despite the risks associated with Jordan's dependence on overseas assistance, and with the complicated security situation in the region, we note that Jordan has demonstrated resilient economic growth and maintained its fiscal and economic reform efforts,” S&P said

Although Jordan is not directly involved, the conflict between Israel and Hamas is affecting its tourism sector, which is its main foreign currency earner, as well other sectors of the economy.

S&P forecasts Jordan's economic growth at 2.7 per cent in 2025, provided regional security situation stabilises, tourism recovers and trade with Syria and Iraq starts to rise gradually. Tourism alone contributes around 15 per cent to the kingdom's GDP, about three-quarters of which comes from Arab visitors, the ratings firm said.

The economy is forecast to pick up in the following years – towards 3 per cent by 2026 and 2027 – as the economy “readjusts from the shocks it has suffered in recent years due to regional geopolitical developments”.

In February, US President Donald Trump ordered the shutdown of USAID, which sent “ripple effects” across Jordan's economy. The impact is “devastating” for the most vulnerable groups – from refugees to people with disabilities – in the agency's third-biggest aid recipient, the head of one of Jordan's larger non-government organisations told The National at the time.

The order is expected to have far-reaching economic and geopolitical consequences for the kingdom as thousands of workers at USAID, as well as contractors and partner agencies are laid off or put on leave, with life-saving programmes left hanging in the balance.

Despite that, S&P anticipates that Jordan “will be able to manage the immediate impact of the US administration's decision to pause foreign assistance disbursed through USAID”. It noted that about $300 million of annual disbursements are at risk, most of which are project-related.

The US has provided Jordan with total annual support of between $1.45 billion and $1.65 billion, or roughly 3 per cent of GDP, including broader military and budget-related support, S&P said.

“Under our baseline scenario, we assume that much of this will remain in place, as will the support Jordan receives from other international donors and multilateral partners,” it said.

Jordan has faced challenges for years, with Amman trying to overhaul its economy and cut state subsidies as public debt and unemployment rises.

Inflation has slightly picked up, rising to 2.3 per cent in January 2025 from 0.8 per cent in October, and is expected to remain moderate until 2028, S&P said. The International Monetary Fund in December had projected inflation to remain low, at about 2 per cent, in 2024.

While the Jordanian dinar's peg to the US dollar has supported price stability and contained inflation, it also limits the Central Bank of Jordan's ability to manoeuvre its policy because it effectively follows the decisions of the US Federal Reserve, “which may not always be appropriate for Jordan's economic conditions”, the ratings agency said.

The kingdom's unemployment rate is very high at 21.4 per cent as of 2024, amid government reforms to spur economic activity in the medium term, prioritising job creation in the private sector through improvements to the business and investment environment, S&P said.

Jordan still retains access to alternative financing sources, including a $1.2 billion IMF programme and a five-year partnership with the World Bank, which offers indicative funding of $5.67 billion. The EU had also announced a €3 billion ($3.25 billion) aid package for 2025-2027.

With the kingdom having liquid assets equal to 10 per cent of GDP at the end of 2024, “this gives it scope to manoeuvre in funding its budgetary deficits and repaying maturing commercial debt”, S&P said.