Index trend
Previous quarterly editions
Expropriation risk: 47 47 45 44 ► Political violence risk:51 51 51 57 ▲Terrorism risk:44 44 44 44 ►Exchange transfer and trade sanction risk: 55 55 55 55 ►Sovereign default risk:74 74 74 74 ►
Overall Risk Temperature: 58 (Significant 2) TREND ▲
Special topic: Gray zone aggression
Degree to which the country relies on outbound gray zone action to achieve its strategic objectives1 = Not at all5 = Gray zone action is a core tactic
2
Impact of inbound gray zone attacks on the country1 = Negligible impact5 = Significant impact on economic growth and/or political stability
3
Jordan's military policy is largely defensive, focused on deterrence and counterterrorism. The country is not a major player in Middle East conflicts nor a principal adversary of Iran, which shields Jordan somewhat from gray zone aggression.
However, since the October 2024 inception of the Israel-Hamas war, Jordan has become increasingly affected by the proliferation of gray zone warfare across the Middle East region. Most notably, there is a threat of gray zone aggression from Iran, which warned in April that Jordan would be the “next target” if Jordan intervened in the conflict with Israel. Indeed, Jordan thwarted an attempt in May by Iranian-backed militias to smuggle arms into the country, and a cache of weapons linked to Iran-backed groups was found in an Amman suburb in June. Kata'ib Hezbollah in Syria threatened to arm 12,000 Jordanians, and Hamas has been urging Jordanians to protest on the streets. Though not directly targeted, Jordan has also been affected by Houthi and Iranian actions.
Jordan's primary response to threats has been its air force, while limited gray zone actions have been employed, notably intelligence operations. In response to “Jordan's 9/11” — the November 2005 bombings in Amman by Al-Qaeda in Iraq, the parallel being drawn with the September 2001 terrorist attacks on the United States — the king ordered the establishment of the “Knights of God” intelligence-gathering teams under the General Intelligence Directorate, which became active in Iraq.
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The risk of expropriation remains low. Investment law includes guarantees for national and foreign investors against expropriation. This includes that no economic operations can be expropriated directly or indirectly unless this is undertaken in the public interest and if investors are fairly and speedily compensated, in a convertible currency. The only case where expropriation is likely to take place is in the interest of national security; this usually amounts to confiscation of land. There have been no expropriation cases against foreign investors in Jordan, at least in the past five years.
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There is likely to be an increase in political violence in coming months, as discontent and protests in urban and rural centers rise across the country. These protests are being driven by the deteriorating standard of living. The security forces will likely adopt a more robust response to protestors. That will lead to skirmishes and possible standoffs, especially in tribal areas.
There is a persistent medium risk of terrorism in Jordan, given the country's proximity to conflicts in neighboring Iraq and Syria, where terrorist groups such as Islamic State, Al-Qaeda and Al-Qaeda-linked outfits operate. Moreover, Jordanian communities, notably in Zarqa and Maan, have hosted sympathizers who have joined and led terrorist groups operating in neighboring states and have, themselves, staged large-scale attacks in Amman.
The security forces have proven effective at mitigating planned terrorist attacks and benefit from efficient intelligence services, which operate in Jordan and are embedded in neighboring states. Nevertheless, terrorism continues to pose a threat.
The most recent major attack in Jordan occurred in January 2024, when a drone strike targeted a U.S. military outpost near the border with Syria. This attack, attributed to an Iranian-backed militia, resulted in the deaths of three U.S. soldiers and injuries to more than 40 others.
Jordan's liberal foreign exchange law entitles foreign investors to remit abroad, in a fully convertible foreign currency, foreign capital invested, including all returns, profits and proceeds arising from the liquidation of investment projects. Non-Jordanian administrative and technical employees are permitted to transfer their salaries and compensation abroad.
The Jordanian dinar will stay pegged to the U.S. dollar. The large current account deficit will be partly financed by inward foreign investment, debt inflows and donor support. Foreign reserves are rising and in April 2024 amounted to $19 billion, which is equivalent to 8.3 months of external payments. This should provide sufficient support to maintain the peg.
External conditions and political resistance to further austerity remain challenging. Jordan will retain U.S. loan guarantees and access to foreign borrowing at concessional rates from multilateral institutions, and it will be able to meet its repayments fully. However, it is constrained by wide fiscal deficits and high public debt.
Jordan's reopening of its border with Syria and its call for other states to normalize relations with the Assad regime opens the kingdom to the risk of sanctions, especially as Syrian goods transit onwards to the Gulf states. However, King Abdullah was careful to secure implicit support from the White House before reopening the border and assurances that the provisions of the Caesar Syria Civilian Protection Act of 2019 would not include Jordanian businesses or personnel. Given that the Caesar Act enjoys nonpartisan support in the U.S. Congress, Jordan will depend upon both the White House and goodwill among its supporters in Congress to ensure that Jordanian businesses are not subject to sanctions.
Meanwhile, the flow of narcotics, especially Syrian-produced captagon, poses a significant challenge to Jordanian customs and immigration on the Syrian borders. The drug's penetration of Gulf markets means that it will remain a high-profile issue that draws the attention of U.S. policymakers and, therefore, keeps Amman on the sanctions radar.
Although Jordan has rebounded from the adverse impact of COVID-19, the country's credit challenges — including high government debt and social pressures stemming from weak growth and high unemployment — are still pertinent. These will continue to constrain Jordan's creditworthiness, although the government's commitment to structural reforms and medium-term fiscal consolidation planning, alongside international support for Jordan from the United States and Gulf Arab states, means that positive outlook is likely to remain stable over the coming few years.
In May 2024, Moody's upgraded Jordan's credit rating to Ba3 and changed the outlook from “positive” to “stable.” The change in outlook is driven by the government's commitment to structural reforms and its track record of effective implementation of fiscal reforms, which should enhance Jordan's credit profile. The stable rating comes on the back of solid and credible policymaking institutions, along with strong international support and considerable domestic savings that together strengthen the economy in face of external vulnerability risks.
However, these strengths are offset by challenges such as high debt levels, structural barriers to growth, elevated unemployment, social pressures and volatile regional geopolitical tensions.
Moody's predicts that the government's debt will decline to 80% of GDP by 2027 – 2028. The public deficit is likely to narrow because of sustainable revenue gains from tax administration-related reforms targeting increased compliance.
In May 2024, Fitch affirmed Jordan's Long-Term Foreign-Currency Issuer Default Rating at BB– with a “stable” outlook. The ratings are supported by a record of gradual fiscal and economic reforms and resilient domestic and external financing linked to the liquid banking sector, public pension fund and funding from Jordan’s external partners. However, the ratings are constrained by weak growth, monetary tightening, high unemployment and geopolitical risk, plus large external financing needs.
The conflict underway between Israel and Hamas has increased geopolitical risks due to the uncertainty surrounding the conflict’s length and the possibility of further escalation. However, in the short term, these risks are offset by substantial international support, both multilaterally and bilaterally, including military and economic aid from the United States, as well as reduced vulnerability to fluctuations in food and energy prices and potential supply chain disruptions.
Despite facing substantial external pressures, such as social unrest in the region and conflicts in neighboring countries (Iraq and Syria), Jordan has proved to be resilient in managing to maintain economic and political stability. However, these events have resulted in reduced economic growth and a significant increase in government debt. An extended or intensified conflict, even if Jordan remains uninvolved, could undermine the country’s growth prospects and amplify the challenges associated with fiscal consolidation.
