Fitch expects Jordan to cut interest rates before 2025 end

Ammon

15 hours ago

Ammon News -
A recent international economic report showed that the Jordanian economy performed stronger than expected in the first quarter of 2025, prompting economic risk analysis firms to raise their annual GDP growth forecasts from 1.6% to 2.0% for 2025.
According to a report by Fitch Ratings, recently released data from the Jordanian Department of Statistics revealed an annual growth rate of 2.7% in the first quarter of 2025, while seasonally adjusted quarterly growth reached 0.7%, which is in line with the economic performance since the beginning of 2024.
The industrial sector, which accounts for approximately 17.7% of GDP, contributed to this growth, recording a 5.1% growth rate, the highest rate since the first quarter of 2008, according to the report.
The Department of Statistics' estimates showed a 2.7% increase in GDP growth for the first quarter of 2025 at constant prices, compared to the same period in 2024, when growth was only 2.2%.
According to the estimated results, the majority of the Kingdom's economic sectors achieved significant growth during the first quarter of 2025, compared to the first quarter of 2024, despite ongoing regional conditions and their repercussions and impact on the economies of the region and the world.
In terms of sectoral growth during the first quarter of 2025, the agriculture sector achieved the highest growth rate of 8.1%, contributing 0.45 percentage points to the achieved growth rate, followed by the electricity and water sector with a rate of 5.8%, contributing 0.08 percentage points, then the manufacturing sector with a rate of 5.1% and a contribution of 0.88 percentage points, followed by the social and personal services sector, which grew by 3.4% and a contribution of 0.27 percentage points to the achieved growth rate.
US Tariffs Impact
Despite the positive growth outlook, the report warned of a slowdown in economic activity starting in the second quarter of 2025, due to the expected repercussions of US trade protectionism, especially after US President Donald Trump announced the imposition of reciprocal tariffs on goods starting August 1.
The report predicted that tariffs on Jordanian goods exported to the United States would rise to between 10% and 20%, which would negatively impact Jordan's trade balance, given the importance of the US market to Jordanian exports.
Inflation
The report forecasts that average inflation this year will reach only 1.6%, given the decline in global energy prices.
The Central Bank of Jordan (CBJ) is expected to begin easing monetary policy, in line with the US Federal Reserve, by cutting interest rates by 50 basis points to 6.00% by the end of 2025.
Positive Outlook for 2026
By 2026, the report expects growth to accelerate to 2.8%, as the effects of US tariffs ease and consumer spending expectations improve.
The reopening of neighboring markets—such as Syria and Iraq—will also contribute to boosting export growth and stimulating fixed investment, especially as foreign companies set up industrial facilities in Jordan.
The report predicts that the unemployment rate may decline slightly to 22.3% by the end of 2026, while the decline in oil prices will provide additional support to households' purchasing power.
Existing Risks
The report concluded by noting that risks to growth prospects remain tilted to the downside, as escalating regional conflicts or increased US tariff policies could lead to higher energy prices or reduced demand for exports, potentially weakening the Kingdom's future economic prospects.