AMMAN — The World Bank (WB) has issued a warning that the
ongoing Israeli war on Gaza could potentially impact the Jordanian economy,
particularly in the tourism sector, leading to a decrease in tourism revenues
and external accounts.
اضافة اعلان
A threat to the
tourism sector
According to an economic report, the war poses a significant
threat to tourism activity and its revenues. This concern arises, especially at
the beginning of one of the peak seasons, following the robust recovery of the
tourism sector from the COVID-19 pandemic.
The report notes rapid growth in the restaurant and hotel
sector, with the number of tourists reaching its highest level since 2019, as
reported by Al-Mamlaka TV.
The tourism recovery in Jordan for the current year has been
extensive across travel categories and countries of origin. Notably, one-day
tourists have shown a significant increase of 76 percent, with this category
representing around 17 percent of total arrivals in 2023. The report suggests
that these tourists, who often visit Jordan as part of tours including lands
occupied by Israel, maybe the most directly affected by the ongoing war.
50 to 75 percent
decrease in hotel occupancy since Oct. 7
Preliminary reports from tourism agencies indicate a
substantial decline in hotel occupancy rates and reservations, ranging from 50
to 75 percent during the two months following the onset of aggression,
particularly in renowned tourist sites.
Aviation concerns
Simultaneously, the aviation sector, still recovering from
COVID-19 losses, may face higher operational costs. Flights are taking longer
routes to avoid war zones, and additional costs may arise in case of higher
fuel prices, potentially affecting consumer prices.
Tourism Minister Makram Al-Qaisi reported a 50 percent
decline in hotel reservations in Jordan since the beginning of the war on Gaza
on October 7. He revealed a decrease in demand for tourist sites and
reservations in tourist restaurants by 40 to 70 percent, according to data
received from popular tourist sites like Petra and tourism associations.
A cancellation of 23
charter flights since Oct. 7
Qaisi further highlighted the cancellation of 23 charter
flights and 26 ship flights to Aqaba from the start of the war until the end of
the year. These cancellations are causing losses to hotel establishments and
impacting tourist group reservations, including conference and party tourism
programs, restaurant reservations, and daily-use facilities.
WB indicated that the decline in tourism may have broader
impacts on economic activity, given the close links of the restaurant and hotel
sector with other significant sectors of the Jordanian economy, including
wholesale and retail trade, transportation, and construction.
The WB expects a decline in domestic consumption due to
behavioral changes, representing a substantial portion of the gross domestic
product. In the worst-case scenario of regional escalation, disruptions in
trade flows could affect value chains, and production costs, and impact
domestic and foreign investment.
Strikes do not serve
to support the people in Gaza — Khasawneh
Prime Minister Bisher Al-Khasawneh emphasized during a
government session that calls to paralyze economic activity, including strikes,
do not serve to support the people in Gaza and may lead to harm to people's
livelihoods and the economic situation. He stressed that such actions are
expressions aimed at political pressure and cautioned against self-harm and
weakening the Jordanian internal front.
The WB also warned of potential challenges in the gas
sector, including the possibility of importing natural gas at a higher cost if
developments escalate. Gas imports, subject to long-term agreements, come from
Egypt and the Leviathan gas field from the Israeli side. The report highlighted
the potential impact on the National Electricity Company, which may need to
import liquefied natural gas at a higher cost.
The worst-case
scenario
The report further addressed external accounts, noting the
potential repercussions on the current account balance, particularly in 2023,
due to a decline in travel revenues. In a pessimistic scenario, a decline of up
to 30 to 50 percent in travel revenues during the fourth quarter of the year
could lead to a deterioration in the current account deficit, with a gradual
expected return by 2025.
The report also considered the impact on the capital
account, anticipating a decline in net inflows with a decrease in foreign
direct investment. The second channel of impact involves potential rises in oil
prices, which could significantly impact the energy market. While oil markets
saw some fluctuations at the beginning of the aggression, the report
highlighted the risks for energy markets, especially if the war escalates.
For Jordan, as a net energy importer, an increase in oil
prices to $100 to $110 per barrel could result in an elevated current account
deficit in 2024, compared to baseline estimates. The report suggested that
remittances from Jordanians working abroad in oil-exporting Gulf Cooperation
Council countries and increased budget support from those countries could
partially compensate for the impact of higher oil prices.
Regarding merchandise trade, the report indicated that
Jordanian exports to the West Bank, Gaza Strip, and Israel represent 2.5
percent and 1.1 percent of total exports in 2022, respectively. Exports to the
United States of America represent 20.9 percent of total exports. However, the
report highlighted potential disruptions in exports to the US, particularly
those through Qualified Industrial Zone (QIZ) agreements, due to difficulties
in sourcing inputs from war zones.
The repercussions of the ongoing war on public finances are
characterized by complexity, with potential impacts on the real value of
government expenditures due to high inflation. Rising oil prices could lead to
increased spending on fuel subsidy programs, affecting public transportation
and cooking gas. Higher spending on fuel subsidies may divert funds from
government capital spending.
Estimates suggest that a 10 percent increase in oil prices
could result in a 0.2 percent increase in the fiscal deficit. If oil prices
reach $100 to $110 per barrel, this could mean a 0.4 percentage point increase
in the deficit as a percentage of GDP. The report indicated that borrowing
needs may increase to compensate for the shortfall, putting pressure on debt
service requirements given the high cost of financing.
Regarding sovereign risks and the cost of financing, the
report noted a temporary increase in interest rate spreads measured by the
emerging market bond index during the period from October 1 to 30. Jordan
recorded an average of 437.8 basis points, compared to 311.8 basis points in
September. Despite the temporary increase, Jordan's sovereign risks remain
lower than its neighbors, according to the report.
Fitch Ratings affirmed Jordan's rating at BB- with a stable
outlook despite the ongoing war, citing Jordan's record of maintaining economic
and political stability in the face of major external shocks.
On the Palestinian
side
On the Palestinian side, Gaza has lost no less than 66
percent of job opportunities since the outbreak of the Israeli aggression,
equivalent to 192,000 jobs, according to estimates published by the
International Labor Organization and the Palestinian Central Bureau of
Statistics on Wednesday.
The economic conditions in the West Bank have also been
affected, with revised estimates indicating the loss of approximately 32
percent of job opportunities since the beginning of the war, equivalent to
276,000 jobs.
Estimates from the chief economist at the Israeli Ministry
of Finance, Shmuel Abramson, suggest that each month of war may lead to a loss
in gross domestic product amounting to between 8 and 9 billion shekels ($2.1
and 2.4 billion), as well as future losses to the economy and labor market.
Read more National news
Jordan News
.jpg)
.jpg)
