The Department of Statistics recently announced that GDP growth at constant prices reached 2.8 per cent, compared to 2.4 per cent in the second quarter of 2024. This represents an increase of 0.4 per cent compared to the second quarter of 2004, and also an increase from the first quarter of 2025. The manufacturing sector was the largest contributor to this new growth, accounting for 0.89 percentage points and representing the largest share. Furthermore, growth occurred across all sectors. Hence, is there any reason for optimism about emerging from the low growth figures that the Jordanian economy has suffered since 2010?

 

First, it can be said that, in recent years, the "normal" range for normal or sustainable annual real growth rate in Jordan is between 2 per cent and 4 per cent. This is because the population growth rate in most Arab countries is between 1 per cent and 2 per cent annually, and productivity growth (improved efficiency, technology, and human capital) typically adds 1–2 per cent, bringing the total to 2–4 per cent as the normal sustainable real growth rate.

 

However, positive or negative deviations from these growth rates may occur. Positive developments result from exceptional expansions, such as the oil boom that occurred in the region and benefited Jordan between 1974 and 1982, or massive projects and investments, such as those that occurred between 2004 and 2008 following the US invasion of Iraq and the influx of Iraqi refugee funds ($17 billion). Deviations may be adverse, resulting from rising energy prices, as has occurred in Jordan since 2012, and also during the COVID-19 pandemic.

 

Globally, the historical average for the global economy for real economic growth rates over the past 30 years has been approximately 3 per cent to 3.5 per cent annually. Growth rates in advanced economies have typically ranged between 1.5 per cent and 2 per cent due to low population growth rates and the fact that mature economies operate near the limits of economic capacity, i.e., operating near or at their highest potential. In developing economies, growth rates have ranged between 4 per cent and 6 per cent, depending on the stage of development, population size, and investment.

 

It is not enough to simply look at the real growth rate of the economy (the percentage increase in the total volume of production (real GDP) of a country from one year to the next after excluding the effect of inflation). Rather, the real growth rate of per capita income must be calculated. This is done by subtracting the population growth rate (as a percentage) from the real growth rate. If the result (number) is positive, this means that real per capita income has improved, i.e., increased (by a percentage). Since the population growth rate in Jordan does not exceed 1 per cent this year, real per capita income has improved by 1.8 per cent (2.8 per cent minus 1 per cent), clearly a welcome improvement.

 

Regarding the macroeconomic outlook, the real growth rate (2.8 per cent) exceeds the projected 2.5 per cent in the 2025 budget speech. The nominal growth rate (5 per cent for this year) also exceeds the projected 4.9 per cent in the 2025 budget speech. The improvement in growth rates currently occurring is gradual and significant compared to growth rates in recent years.

 

With inflation below 2 per cent, lower than the IMF's projection of 2.6 per cent, quarterly unemployment rates consistently declining, and the central bank's foreign exchange and gold reserves covering more than 9.1 months of imports (the highest level in Jordan's history), there is a genuine cause for optimism. Thanks go to everyone who has contributed to the return of optimism to the Jordanian economy.