Jon Rizvi

At the pump right now, it costs 1 JD per liter of Octane 90. For a family on minimum wage, that means filling up a car requires almost 5 days of work, and that does not include household or domestic workers who likely have to work even more. With food prices also rising, Jordanian families are at the breaking point and poverty is becoming a more looming threat.

The newly released May report on external trade by the Jordanian Department of Statistics shows a decrease in the balance of trade deficit and export growth. Despite this, economic growth is not where it needs to be in order to reduce high unemployment numbers Jordanians are facing. On top of this, rising fuel prices continue to haunt Jordanian households, leading them to demand alternative fuel vehicles.

What does the report mean for Jordanians?

A big contributor to the trend of increased in imports the last few months is petroleum and fuel product imports which have shot up. This is not surprising given the Hormuz crisis has caused global fuel prices to jump as major fuel exporters like the UAE and Saudi Arabia have had their exporting capacity slashed. As long as the Hormuz strait remains closed, Jordan will continue to face higher fuel prices and subsequently an increase in import value.

            Alongside the increase in fuel prices, there was a notable increase in vehicle imports going from making up around 6% of imports to 11%. This may represent a shift in demand for more electric vehicles after the rise of gas prices. Jordanians in order to circumvent paying exorbitantly for gas are investing in electric vehicles for themselves. As EVs are increasingly seen as more economical, the trend of increased vehicle imports may persist.

As the May report also details, growth in national exports have largely been concentrated in fertilisers and potash with the Kingdom’s second greatest export after textiles is fertilisers. Jordan primarily exports potassium- and phosphate-based fertilisers due to its natural abundance of potash and phosphate. Since 30% of the world's nitrogen fertilizers come out of the Persian Gulf, its closure as a result of the US-Iran war led to increased prices. The price increase in nitrogenous fertilisers can spill over to other fertilisers which can potentially explain increase in fertiliser exports in March, following the start of the war.

While this may be good for fertiliser producers, farmers and everyday Jordanians are the ones who will suffer. Fertiliser production does not use much labor, so its growth will do little to combat unemployment. On the other hand, high fertiliser prices force local farmers into a tough choice of downsizing or increasing crop prices which spillover as higher food prices for every Jordanian. Furthermore, if high local food prices cause imported food to be more attractive, local farmers may be forced out of businesses leading to more unemployment and worse trade deficit.

            The last thing the report shows is a huge spike in re-exports of precious metals to the UAE. On one hand, it could be a result of airline rerouting or suspension to the Persian Gulf with Queen Alia Airport being used as the hub through which precious metals are transported to the UAE. Another reason may be that global traders and countries are liquidating their precious metal assets as prices are at an all time high and taking advantage of Jordan’s preferential trade status. This could potentially lead the government into overestimating economic growth and underproviding for Jordanians. However, it also shows the capacity for Jordan to become a major regional logistics hub, providing jobs for many Jordanians and relieving some pressure on unemployment.

What can the government do?

            In terms of rising fuel prices, the Jordanian government should continue to commit to their green energy goals buying either providing subsidies for electric vehicle purchasing or working to procure cheaper EV imports through established relationships from preferential trade agreements. Improving energy production will also be important to an acceptable environment for EVs. Although the government could subsidize gas prices further, it is already doing so at great cost.

            The Jordanian government should also try to subsidize local farmers to not only reduce unemployment growth but to keep local food prices from rising. By subsidizing local farmers, less farmers will be forced out of business to join the unemployment pool. Lower local food prices as a result will relieve a burden off all Jordanians. Furthermore, farmers will be able to purchase a fertiliser leading to stable demand for fertiliser production, protecting the industry if or when fertiliser prices stabilize.

            Lastly, the government should take advantage of its growing role as a major trade hub in the region. It already has preferential trade agreements with Western economies and the region. Through trade regulation and investment in logistical capacity, the Kingdom can encourage bulk trade through the country and grow the logistics industry to employ Jordanians. If Jordan signs a preferential trade agreement with China, investment from there could flow in to the country. Final stages of the production process could be done in Jordan, providing jobs and growth, and then goods could be shipped to Western economies with few tariffs.