Jordan and the West Bank and Gaza Business Forecast Report Q4 2012

BMI RatingsCONTENTS
BMI Risk Ratings – Jordan
BMI Risk Ratings – West Bank
Middle East – Ratings League Tables
BMI Risk Ratings – Middle East Tables
Executive Summary – Jordan
Core Views
Major Forecast Changes
Key Risk To Outlook

Chapter 1 1: Political Outlook – Jordan
SWOT Analysis
Domestic Politics
Prime Minister Set To Resign?
There are growing question marks over the Jordanian government's willingness to persist with the fiscal austerity measures that it
has implemented since the beginning of the year Following King Abdullah 's decision to block the fuel tariff hikes that were recently
approved by the cabinet, there is a possibility that the IMF could withhold further funding, which could threaten broader economic and
political stability
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Further Reforms On The Horizon?
Following a series of political and economic reforms by the government in recent years, we maintain that Jordan's long-term political
outlook is among the most stable in the region

Chapter 1 2: Economic Outlook – Jordan
SWOT Analysis
Economic Activity
Slowdown Ahead
Economic growth in Jordan will remain sluggish over the coming years Weak FDI inflows, a flagging tourism sector and high commodity
prices will drag on the economy in the near term, while policymakers have few fiscal or monetary levers at their disposal to manufacture
any turnaround in the country 's fortunes We forecast real GDP growth to fall to 1 8% this year, from 2 6% in 2011
TABLE: ECONOMIC ACTIVITY
Balance Of Payments
Devaluation Looming In 2013
Although the recently-approved IMF Stand-By Arrangement will provide some respite to Jordan's increasingly precarious balance of
payments position, we are sticking to our call for the dinar to be devalued at some point in 2013
TABLE: CURRENT ACCOUNT
Fiscal Policy
IMF Support No Panacea
Although a recently approved IMF Stand-By Arrangement will provide a modicum of support to Jordan's beleaguered public finances,
the country is nevertheless entering into a prolonged period of fiscal tightening While a fiscal crisis is outside our core scenario, the
government is facing a multitude of challenges
TABLE: FISCAL POLICY

Chapter 1 3: 10-Year Forecast – Jordan
The Jordanian Economy To 2021
Exports Driving Long-Term Growth
Stable export growth and an expanding private sector will underpin Jordan's economic progress over our 10-year forecast period That
said, remittances (mostly from Saudi Arabia) will also be a key factor driving growth, highlighting the extent to which expatriates will
remain key to the economy through 2021
TABLE: LONG-TERM MACROECONOMIC FORECASTS

Chapter 1 3: Business Environment – Jordan
SWOT Analysis
Executive Summary – West Bank & Gaza
Core Views
Key Risk To Outlook

Chapter 2 1: Political Outlook – West Bank & Gaza
SWOT Analysis
Domestic Politics
Fatah-Hamas Unity As Far Away As Ever
Recent developments in the West Bank and Gaza have reaffirmed our long-held view that the prospect of a unification of the West
Bank-based Fatah party with their Hamas counterparts in Gaza is as remote as ever We expect tensions between the two parties to
remain elevated in the months ahead, further isolating Hamas within the international community
Long-Term Political Outlook
Monumental Obstacles To Statehood
Over the next decade, the Palestinian territories will continue to face extremely challenging political obstacles, both internally and
externally We remain sceptical about the potential for a negotiated settlement or unilateral declaration of independence to bring peace
and stability

Chapter 2 2: Economic Outlook – West Bank & Gaza
SWOT Analysis
Economic Analysis
Fiscal Woes To Hit Economy
The economy in the West Bank & Gaza is unlikely to sustain the same pace of robust growth that it has achieved in recent years With
government finances coming under serious strain, foreign aid receipts falling, and the Israeli government maintaining tight restrictions on
the movement of goods and people across the territories, growth is likely to settle at a more subdued pace in the years ahead
TABLE: ECONOMIC ACTIVITY
Fiscal Policy
Approaching A Fiscal Crisis
Public finances in the West Bank & Gaza are in perilous state, with a fall in aid receipts leaving the administration in the West Bank
in particular struggling to meet its spending commitments Without external support, there is significant risk of severe cutbacks to
government services
TABLE: FISCAL POLICY

Chapter 2 3: Business Environment – West Bank & Gaza

Chapter 2 4: 10-Year Forecast – West Bank & Gaza
The West Bank and Gaza Economy To 2021
Long-Term Growth Outlook Far Below Potential
We forecast steady, moderate real GDP growth in the West Bank and Gaza based on our assumption that Israeli restrictions on the
movement of goods and people into and out of the territories will not change significantly over our 10-year forecast period
TABLE- LONG-TERM MACROECONOMIC FORECASTS

Chapter 4: BMI Global Assumptions
A Pivotal Autumn Approaches
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST 49