J ordan’s economy demonstrated resilience in 2023, achieving modest growth amidst a challenging regional environment. Real GDP growth accelerated to 2.7 percent in 2023, up from 2.6 percent in 2022. Economic growth was broad-based, with manufacturing growth hitting a record high, and robust performances in services and agriculture. In the services sector, restaurants and hotels recorded the second highest growth since 2017. Going forward, growth is expected to slow to 2.4 percent in 2024 affected by the conflict in the Middle East, with a slight recovery to 2.6 percent projected thereafter.

Despite the (small) economic growth acceleration, labor market outcomes remain sluggish, with some signs of improvement in the second half of 2023. Unemployment continued to decline for the second consecutive year, reaching 22.0 percent in 2023, compared to 22.8 percent in the previous year. This included a decline in both males and female unemployment. More recently, the unemployment rate was stable at 21.4 percent in Q1-2024, unchanged from its level in the previous quarter. Labor force participation, however, declined for the second consecutive year, recording 33.2 percent in 2023, compared to 33.4 percent in 2022. Female labor force participation recorded 14.0 percent in 2023, broadly unchanged since 2021, staying among the lowest in the world. More recently, female participation increased to 15.5 percent in Q1-2024, which remains lower than the regional average. Despite the lower annual average, the labor force participation inched up slightly in the last quarter of 2023, supported by an increase in female participation.

In line with global trends, inflation decelerated significantly in 2023 and is expected to remain contained in 2024. Headline inflation rate decelerated to 2.1 percent in 2023, down from an average of 4.2 percent in the previous year. The deceleration was supported by a favorable base effect, favorable international commodity prices and monetary policy tightening. Policy rates were held unchanged at 7.25 percent since July 2023, while real interest rates remain positive. Looking forward, inflation is anticipated to remain contained in 2024, supported by the lagged effects of monetary policy tightening and relatively stable international commodity prices, notwithstanding some transitory impact from the conflict in the Middle East, including higher international oil prices as well as higher shipping costs due to the Red Sea disruptions.