21 July 2014
Jordan's economy, burdened by an influx of Syrian refugees and turmoil in neighboring countries, is not growing fast enough to tackle high unemployment rates and the kingdom needs to pursue wider labor market reforms.
The government's austerity measures have limited new public sector jobs, while moderating growth is failing to absorb new labor entering the market. The influx of Syrian refugees, who now make up around 9% of the population, has further reduced national workforce participation.
"Jordan has a structurally weak labour market. Regardless of the state of the business cycle, the unemployment rate in Jordan remains in double digits, reflecting high structural unemployment," the World Bank said.
Last year, the unemployment rate rose to 14% in the third quarter, its highest level since 2009. It has remained stubbornly high at 12.6% over the past three years.
The kingdom needs to increase employment by an estimated 400,000 full-time positions by the end of the decade. The International Monetary Fund estimates that creating that many jobs would require an average annual real GDP growth of 6.1% -- a tall order.
Jordan's economy grew by 3.2% in the first quarter, an improvement over growth rates of the last four years. However, current growth forecasts would only generate 275,000 jobs.
Refugee influx
Jordan reportedly houses nearly 600,000 of the 2.5 million Syrian refugees that have fled a bloody three-year-old civil war.
The International Labour Organization believes the potential active refugee labour force in Jordan stands at 108,265 refugees. Of these, about 38,155 are employed, "either regularly or irregularly with or without work permits."
The governorates with the highest ratios of Syrians to Jordanians are Mafraq (19.82%), Irbid (10.67%), Ajloun (6.5%) and Amman (5.4%) according to United Nations Human rights Commission estimates.
Syrians now constitute around 8.4% of the total potential active workforce in those governorates and make up around 3.5% of all employed people in Jordan.
Refugees are reportedly willing to work for lower wages, discouraging Jordanian workers to seek unemployment. As these workers drop out of the job market, they are no longer counted in the rank of the unemployed. This has exacerbated already-low participation rates in the country.
"We find evidence suggesting that the Syrian refugees are causing a reduction in the national labour force participation rate of Jordanian," according to the World Bank.
A study from the Food and Agriculture Organization shows that the Syrian conflict has decreased domestic employment opportunities in the agricultural sector, which is considered a main source of income for 60% of Jordanians living in rural areas.
International support
While the influx of refugees has strained public resources, sectors like transport, communications, financial services and construction have seen stronger activity. Manufacturing was also boosted as some Syrian companies relocate to Jordan.
"On the one hand, the refugees, most of whom live in Jordanian urban centres, put further strain on Jordan's limited resources," Citiibank said in a report.
"On the other, their presence, along with that of the NGO community which has swelled as a result of the conflict, is supporting domestic demand and motivating an increase in aid flows to the kingdom."
Last year, the IMF waived two key missed targets and pushed through a disbursement of funds under a 36-month USD 2.1 billion stand-by agreement.
"While it is not unusual for the IMF to waive performance targets, we believe that Jordan is benefitting from international support as a result of its central role in dealing with the spillover of the conflict in Syria (particularly the refugee crisis), as well as its general geo-strategic regional importance," Citibank said.
The underwriting of the kingdom's recent USD 1.25 billion bond issue by the US government is another case in point, the bank noted.
Jordan's total foreign exchange reserves stood at USD 13.4 billion earlier this year, compared to USD 8.8 billion last year, even though economic activity remains subdued.
The feature was produced by alifarabia.com exclusively for zawya.com.
© Zawya 2014
Jordan's economy, burdened by an influx of Syrian refugees and turmoil in neighboring countries, is not growing fast enough to tackle high unemployment rates and the kingdom needs to pursue wider labor market reforms.
The government's austerity measures have limited new public sector jobs, while moderating growth is failing to absorb new labor entering the market. The influx of Syrian refugees, who now make up around 9% of the population, has further reduced national workforce participation.
"Jordan has a structurally weak labour market. Regardless of the state of the business cycle, the unemployment rate in Jordan remains in double digits, reflecting high structural unemployment," the World Bank said.
Last year, the unemployment rate rose to 14% in the third quarter, its highest level since 2009. It has remained stubbornly high at 12.6% over the past three years.
The kingdom needs to increase employment by an estimated 400,000 full-time positions by the end of the decade. The International Monetary Fund estimates that creating that many jobs would require an average annual real GDP growth of 6.1% -- a tall order.
Jordan's economy grew by 3.2% in the first quarter, an improvement over growth rates of the last four years. However, current growth forecasts would only generate 275,000 jobs.
Refugee influx
Jordan reportedly houses nearly 600,000 of the 2.5 million Syrian refugees that have fled a bloody three-year-old civil war.
The International Labour Organization believes the potential active refugee labour force in Jordan stands at 108,265 refugees. Of these, about 38,155 are employed, "either regularly or irregularly with or without work permits."
The governorates with the highest ratios of Syrians to Jordanians are Mafraq (19.82%), Irbid (10.67%), Ajloun (6.5%) and Amman (5.4%) according to United Nations Human rights Commission estimates.
Syrians now constitute around 8.4% of the total potential active workforce in those governorates and make up around 3.5% of all employed people in Jordan.
Refugees are reportedly willing to work for lower wages, discouraging Jordanian workers to seek unemployment. As these workers drop out of the job market, they are no longer counted in the rank of the unemployed. This has exacerbated already-low participation rates in the country.
"We find evidence suggesting that the Syrian refugees are causing a reduction in the national labour force participation rate of Jordanian," according to the World Bank.
A study from the Food and Agriculture Organization shows that the Syrian conflict has decreased domestic employment opportunities in the agricultural sector, which is considered a main source of income for 60% of Jordanians living in rural areas.
International support
While the influx of refugees has strained public resources, sectors like transport, communications, financial services and construction have seen stronger activity. Manufacturing was also boosted as some Syrian companies relocate to Jordan.
"On the one hand, the refugees, most of whom live in Jordanian urban centres, put further strain on Jordan's limited resources," Citiibank said in a report.
"On the other, their presence, along with that of the NGO community which has swelled as a result of the conflict, is supporting domestic demand and motivating an increase in aid flows to the kingdom."
Last year, the IMF waived two key missed targets and pushed through a disbursement of funds under a 36-month USD 2.1 billion stand-by agreement.
"While it is not unusual for the IMF to waive performance targets, we believe that Jordan is benefitting from international support as a result of its central role in dealing with the spillover of the conflict in Syria (particularly the refugee crisis), as well as its general geo-strategic regional importance," Citibank said.
The underwriting of the kingdom's recent USD 1.25 billion bond issue by the US government is another case in point, the bank noted.
Jordan's total foreign exchange reserves stood at USD 13.4 billion earlier this year, compared to USD 8.8 billion last year, even though economic activity remains subdued.
The feature was produced by alifarabia.com exclusively for zawya.com.
© Zawya 2014
