Business Monitor International


Jordan and the West Bank & Gaza Business Forecast Report

Published 16 December 2014 | Quarterly

  • 57 pages
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Jordan and the West Bank & Gaza Business Forecast Report

Core Views

  • International recognition of a Palestinian state is gathering momentum, a trend that will continue over the next decade and deepen Israel's diplomatic isolation. However, actual statehood remains a far-off prospect.

  • The formation of a Palestinian unity government in June 2014 marks a symbolic end to the long-running dispute between the rival Fatah and Hamas factions ruling the West Bank and Gaza Strip respectively. However, the reconciliation agreement will face major difficulties, as ideological differences between the two parties remain stark. Maintaining a central government over two geographically separate regions will be a massive challenge. The unity government will struggle to improve the Palestinian territories' lacklustre economic outlook.

  • We remain downbeat on the economic growth prospects for the Palestinian territories, and forecast real GDP growth of 3.4% in 2015, compared to an annualised rate of 6.3% over 2005-13. The reconstruction of the Gaza Strip - where economic capacity has been severely impacted - will proceed at a slow pace, and high political uncertainty will continue to present a key downside risk to economic activity.

  • Israeli-Palestinian peace talks resumed in August 2013, but failed to progress past their April 2014 deadline. We retain our view that despite efforts by US Secretary of State John Kerry, the current political configuration in Israel, combined with the increasing fragmentation of the Palestinian Authority, will hinder any progress in negotiations.

Key Risks To Outlook

  • Any sustained punitive economic measures imposed by Israel that further constrain exports and imports, or disrupt governmental revenue flows, would pose downside risks to our forecasts for growth and the government budget.

  • Popular discontent, either with Israel or the lack of progress among Fatah and Hamas, could lead to social unrest and thereby undermine the growth prospects of the West Bank and Gaza, and weigh on the territories'...

Table of Contents

Executive Summary - Jordan
11
Chapter 1
13
SWOT Analysis
13
Domestic Politics
14
Gas Deal To Go Ahead Despite Jerusalem Tensions
14
The USD15bn natural gas deal planned between Israel and Jordan will ultimately be concluded, despite rising tensions between the
The USD15bn natural gas deal planned between Israel and Jordan will ultimately be concluded, despite rising tensions between the
two countries linked to unrest in Jerusalem
However, the agreement could be subject to delays, and the Jordanian monarchy will pay a
political price for its growing commercial ties with Israel
Table: JOrdan - POLITICAL OVERVIEW
14
Long-Term Political Outlook
15
Further Reforms On The Horizon-
15
Following a series of political and economic reforms by the government in recent years, we maintain that Jordan's long-term political
Following a series of political and economic reforms by the government in recent years, we maintain that Jordan's long-term political
outlook is among the most stable in the region
Nonetheless, we highlight that the social uprisings that emerged in the region at the
start of 2011 are indicative of the threat that low living standards and lack of political freedoms - both features that Jordan shares with
start of 2011 are indicative of the threat that low living standards and lack of political freedoms - both features that Jordan shares with
countries such as Egypt and Tunisia - pose to long-term political stability
Chapter 1
19
SWOT Analysis
19
Economic Activity
20
Falling Oil Prices To Give A Fillip To Economy
20
We see Jordan's economy growing by 3
Lower oil prices will boost
private consumption, while construction activity is likely to remain fuelled by the government's investment projects
However, regional
instability and disruptions to trade will continue to put pressure on Jordanian exporters
table: JOrdan - Economic Activity
20
Balance Of Payments
23
Twin Deficits Narrowing As Energy Situation Improves
23
Jordan's twin deficits - in the budget and current accounts - will narrow over the coming years, to 3
9% of GDP respectively
by 2018
Lower oil prices, progress towards energy diversification and government efforts to increase revenue will drive these
improvements
table: JOrdan - Current Account
24
Monetary Policy
25
Inflationary Pressure Easing In 2015
25
Jordanian consumer price inflation (CPI) will continue to head lower over 2015 as lower international energy prices outweigh the impact
Jordanian consumer price inflation (CPI) will continue to head lower over 2015 as lower international energy prices outweigh the impact
of a normalisation in food prices
table: JOrdan - Monetary Policy
26
Banking Sector
26
No Rapid Rise In Profitability
26
Profitability and lending activity in the Jordanian commercial banking sector will remain constrained by headwinds over the coming
Profitability and lending activity in the Jordanian commercial banking sector will remain constrained by headwinds over the coming
quarters
0% and
6
Regional Outlook
27
MENA Oil Importers: Good News At Last
27
Cheaper oil will boost economic activity for net oil importers in the Middle East and Africa region over the coming years and ease
Cheaper oil will boost economic activity for net oil importers in the Middle East and Africa region over the coming years and ease
pressure on these countries' fiscal and current accounts
We believe that lower energy prices will provide a supportive backdrop for
subsidy reform in Egypt, Morocco, Jordan and Tunisia, although Lebanon will remain unwilling to pursue such measures
Chapter 1
31
The Jordanian Economy To 2023
31
Exports Driving Long-Term Growth
31
Stable export growth and an expanding private sector will underpin Jordan's economic progress over our 10-year forecast period
That
said, remittances (mostly from Saudi Arabia) will also be a key factor driving growth, highlighting the extent to which expatriates will
said, remittances (mostly from Saudi Arabia) will also be a key factor driving growth, highlighting the extent to which expatriates will
remain key to the economy through 2023
Nevertheless, a growing young population, combined with limited employment opportunities,
could pose downside risks to our long-term outlook, especially if progress in reforming the economy remains subdued
Table: JOrdan - Long-Term Macroeconomic Forecasts
31
Executive Summary - West Bank & Gaza
33
Chapter 2
35
SWOT Analysis
35
Domestic Politics
36
Growing International Recognition Will Not Bring Statehood
36
International recognition of a Palestinian state is gathering momentum, a trend that will continue over the next decade and deepen
International recognition of a Palestinian state is gathering momentum, a trend that will continue over the next decade and deepen
Israel's diplomatic isolation
Long-Term Political Outlook
37
Monumental Obstacles To Statehood
37
Over the next decade, the Palestinian territories will continue to face extremely challenging political obstacles, both internally and
Over the next decade, the Palestinian territories will continue to face extremely challenging political obstacles, both internally and
externally
We remain sceptical about the potential for a negotiated settlement or unilateral declaration of independence to bring peace
and stability
Chapter 2
41
SWOT Analysis
41
Economic Activity
42
Slow Gaza Reconstruction Will Leave Growth Weak
42
We remain downbeat on the economic growth prospects for the Palestinian territories and forecast real GDP growth of 3
4% in 2015,
compared with an annualised rate of 6
The reconstruction of the Gaza Strip - where economic capacity has been
severely impacted - will proceed at a slow pace, and high political uncertainty will continue to present a key downside risk to economic
severely impacted - will proceed at a slow pace, and high political uncertainty will continue to present a key downside risk to economic
activity
table: WEst Bank & Gaza - Economic Activity
42
Chapter 2
45
West Bank & Gaza Economy To 2023
45
Long-Term Growth Outlook Far Below Potential
45
We forecast steady, moderate real GDP growth in the West Bank & Gaza based on our assumption that Israeli restrictions on the
We forecast steady, moderate real GDP growth in the West Bank & Gaza based on our assumption that Israeli restrictions on the
movement of goods and people into and out of the territories will not change significantly over our 10-year forecast period
These
hindrances will negatively impact gross fixed capital formation, exports and government spending, leaving private consumption to
hindrances will negatively impact gross fixed capital formation, exports and government spending, leaving private consumption to
continue underpinning the economy
Table: WEst Bank & Gaza - Long-Term Macroeconomic Forecasts
45
Chapter 3: BMI Global Assumptions
49
Global Outlook
49
Warning Signs Growing
49
Table: Global Assumptions
49
Table : Developed States , Real GDP Growt H, %
50
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
Table : Emerging Markets , Real GDP Growth , %
51

The Jordan and the West Bank & Gaza Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Jordan, West Bank and Gaza and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Jordan, West Bank and Gaza's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Jordan, West Bank and Gaza's economic and industry growth through end-2018.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Jordan, West Bank and Gaza's country risks against regional peers using BMI's country comparative Risk Rankings system.
  • Evaluate external threats to doing business in Jordan, West Bank and Gaza, including currency volatility, the commodity price boom and protectionist policies.

The Jordan and the West Bank & Gaza Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Jordan, West Bank and Gaza economic policy-making and performance impact on corporate profitability over 2014-2018?

BMI provides our fully independent 5-year forecasts for Jordan, West Bank and Gaza through end-2018 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Jordan and the West Bank & Gaza Business Forecast Report features BMI's forecasts with supporting analysis for 2014 through to end-2018, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2018 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Jordan, West Bank and Gaza and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Jordan, West Bank and Gaza, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Jordan, West Bank and Gaza over the next 5-years?

BMI's Jordan, West Bank and Gaza country Risk Rankings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Jordan, West Bank and Gaza Market - Political Strengths, Weaknesses, Opportunities and Threats facing Jordan, West Bank and Gaza.
  • Political Stability and Risk Assessment - BMI's Risk Rankings assess explicit short- and long-term risks to political stability; latest ankings, rankings and trends for Jordan, West Bank and Gaza's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Jordan, West Bank and Gaza's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Rankings with SWOT Analysis - Business Environment Risk Rankings for Jordan, West Bank and Gaza, benchmarked against rankings for regional neighbours.

Country Competitiveness - Competitiveness of Jordan, West Bank and Gaza's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Rankings.

Key Sector Outlook

Which industry sectors in Jordan, West Bank and Gaza will grow fastest, and where are the major investment opportunities in the market?

BMI's identifies investment opportunities in Jordan, West Bank and Gaza's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry with developments over 2009-2013, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2014-2018, using BMI's proprietary industry modeling technique, which incorporates all key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across, and within, each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express