Coronavirus Response // Jordan Market Assessment

This Jordan market assessment is the first in a series of posts detailing liwwa's response to the Coronavirus pandemic. liwwa's goal during this time is to mitigate risk and to honor its fiduciary duty to retail investors and other stakeholders, whilst playing a key role to support the recovery of small and medium-sized businesses in Jordan.


On the 17th of March 2020, Jordan activated the Defence Law by a Royal Decree, putting the country into a state of national emergency and giving the government sweeping powers to introduce new laws and orders to manage the Coronavirus outbreak within the country. Immediately after, a countrywide lockdown was implemented and the private sector was shut down, with the exception of a few vital sectors. All stores have since been closed down except small neighborhood supermarkets and pharmacies. Banks only reopened their branches to customers on the 31st of March 2020 and in a limited capacity. Other measures taken by the government include the closing of all land, sea and air borders to passenger traffic, prohibiting the use of vehicles without a special permit, and the deployment of the military to control the movement of the population. In essence the country and its economy have come to a standstill. On the 25th of March 2020, the IMF approved a $1.3b Extended Fund Facility Programme for Jordan, of which the first tranche of $139m was transferred to Jordan’s Treasury account on the 31st of the month; Jordan’s Finance Minister confirmed that this transfer should help the country with liquidity in such times.

With the government officially closing its borders to visitors and banning both incoming and outgoing flights until further notice, as well as the closure of all touristic and archeological sites, the Jordanian economy for the next several months will have to manage largely without tourist activity, which generates nearly $5 billion annually in revenue, or 12.5% of the total GDP. Since foreigners constitute the majority of the sector’s activity and locals are currently instructed to refrain from leaving their homes, the tourism industry, which employs roughly 50,000 people nationwide, will almost certainly not be able to fill this gap in demand anytime soon.

Even though its borders still remain open for commercial cargo, in the event of continued disruption in global supply chains specifically with key economic partners such as China, Turkey and Egypt, Jordan’s industry and trade will be heavily affected as a net importer. Despite this potential disruption, the Central Bank of Jordan (CBJ) Governor seemed to have a somewhat positive outlook when it came to the area of imports and exports noting that the country’s Foreign reserves can cover imports for up to 7 months at a value of JOD 14b ($20b). He also stated that the falling oil price will decrease the cost of its imports and increase its national exports. However, the benefit of a lower oil price will not be enough to offset the global economic downturn, and the Governor stated that Jordan’s trade balance deficit which currently amounts to 3 percent of the total GDP is expected to reach 4 or 5 percent. The Governor described the reduction in the inflow of remittances from Jordanian expats as “still minor” and said the reduction’s impact is inconsequential to the foreign reserve in the short term.

It is important to note that this is a dynamic situation with no clear end in sight. Although the government of Jordan estimates that the end of the lockdown will occur in mid-April, we cannot be sure there will be no extension of it or that the country will not be in and out of lockdowns for the next several months. With the economy already suffering, it is fair to assume that in the coming months we will see many businesses fail, unemployment increase and economic growth decrease. Furthermore, as many countries and economies are going through similar experiences, we cannot write-off the possibility of a global recession.

Government Response:

The government of Jordan and the CBJ have taken several measures to help mitigate the effects of the shutdown on the private sector and help stimulate the economy. Two significant CBJ decisions include the reduction of main interest rates by 100 basis points to 2.5% and the reduction of the cash reserve requirements for commercial banks from 7% to 5% which is estimated to inject about JD550m into the economy. The CBJ also announced a JD500m SME Soft Financing Programme as a measure to mitigate the lockdown’s effect on the economy in cooperation with The Jordan Loan Guarantee Corporation (JLGC) which will guarantee the loans. The programme will disburse loans of up to 1m JOD ($1.4m) per SME, with a high guarantee level of 85%, low interest rates of 3.5%, and a one-year grace period. This programme will start accepting applications through banks early in the week starting on 12th of April 2020.

The CBJ also allowed banks to postpone installments on outstanding loans without this postponement reflecting negatively on the borrower’s credit report with Jordan’s Credit Bureau. The CBJ also allowed such postponement or even restructurings to occur without any additional fees on the borrower. Furthermore, as a result of bank closures, the CBJ announced that it will be waiving penalties for checks due between the 18th and the 31st of March 2020, giving check drawers three months to settle any bounced checks.

Other governmental decisions include the reduction of the Social Security contributions for individuals and companies alike for the next three months, delaying the payment of general sales tax and customs, the allowance of sectors most affected by the lockdown to pay electricity bills in installments and not suspending service due to late payments until June, and the introduction of price ceilings on essential products.

liwwa Borrower Survey:

Click here to see the results of our comprehensive borrower survey and learn about borrower expectations for the coming period.

The liwwa Team

Read more posts by this author.

Subscribe to liwwa Blog

Get the latest posts delivered right to your inbox.

or subscribe via RSS with Feedly!