2006 was marked by major developments in Jordan, with key advances in the economy, especially in terms of attracting foreign investment, partly offset by the pressures applied by high fuel prices and the need to cut state expenditure.

Jordan finished the year with its economy expanding by 6.2%. Though representing solid growth, this was still down on the 7.2% of 2005 and the 8% of 2004. The government also saw a welcome fall in total debt levels, which were reduced to 72% of gross domestic product (GDP), down from the 82% in 2005. 2006 saw strong growth in exports, which rose by 18% year on year, thanks in part to increased ready-to-wear clothing sales to the Gulf and a strong demand in fertilisers.

Foreign investment in the country boomed, with $3bn of overseas capital inflow, doubling the 2005 figure. As is traditionally the case, the majority of these investments came from the Gulf states, with the main bulk directed towards the property and tourism sectors.

Although Jordan’s property market cooled down towards the end of 2006, the real estate sector enjoyed a good year, with high levels of investment and a series of major new developments being announced. Jordan’s single biggest property scheme is a tourism development to be built at the Red Sea port of Aqaba by the Saudi Arabian construction firm Saudi Oger and rights holder Saraya Aqaba, with a price tag of $995.7m.

With almost no natural energy resources to fall back on, the continued high price of oil hit most sectors of the economy, from agriculture to manufacturing. The effect is likely to be felt even more this year as the government is planning to phase out fuel subsidies, a decision that has already sparked protests.

Jordan ended the year with a budgetary deficit of $320m or 4.5% of GDP, something the government is looking to reduce to a more manageable $270m or 3.4% in 2007. However, the state will have to factor in increased expenditure on wages for its employees, whose salaries have been eroded by inflation, which rose to 6.1% in 2006, double the rate of the year before.

The Amman Stock Exchange had something of a rocky year, with the index falling just over 30% over the year and its trading volume off 16% compared to 2005. The big loser was the financial sector, where the index fell by 33%, followed by a 19% drop in the services sector index while the industry index was down 16% of the year end figure for 2005. Total capitalisation on the Amman Stock Exchange stood at $15bn when trading closed for the year, 21% below the level for the same time the previous year. However, as a reflection of the greater interest by foreign investors in Jordan, the net holdings of non-Jordanians of listed shares rose to 45.1% by the end of 2006.

During 2006, Jordan also unveiled a series of new infrastructure projects, as part of its drive to become a major logistics and transport centre for the region. These include plans for a 28 km standard gauge rail link between Amman and the industrial city of Zarqa estimated at between $120m and $140m, upgrades and expansion of the port of Aqaba and a $284m scheme to build a new terminal at Queen Alia International Airport.

While Jordan has been working hard to win a greater share of foreign investment in the region, its lack of natural resources and the stiff competition it faces from nearby countries will continue to hinder its efforts. However, the government’s willingness to try to expand the economic base of the country, along with having put into place one of the most liberal investment regimes of all its neighbours, helped Jordan get through 2006 and boost hopes for a better 2007.