Impact of the global financial crisis on Jordan

Abstract

In the decade leading to the Global Financial Crisis in 2008, Jordan enjoyed substantial market capitalization and GDP growth. As the crisis swept through the world, Jordan seemed to be unaffected for almost a year, encouraging political leaders and officials as well as analysts to declare that Jordan was immune to the crisis and that it was an anomaly in the global context. A year later, market capitalization was suffering massive losses and the economy was in crisis. Fifteen years later, the economic struggle continued while market capitalization was nowhere near pre-crisis levels. Employing a qualitative exploratory research methodology and semi-structured interviews with senior political decision-makers as well as economic and market experts, the study reveals that despite the delay in the effects of the crisis, Jordan was not an anomaly, and in exploring the causes of the delay, the study uncovers the chronic impacts of serious and chronic structural weaknesses in the economy. The research methodology employed and the constructivist approach allowed for delving into the perceptions and subjective narratives of market stakeholders to develop a rounded understanding of dynamics in Jordan’s economy and money market. The study also concludes that limited liberalization in the 1990s and early 2000s triggered massive capital inflow into the country’s small economy and money market, resulting in the formation of massive bubbles that required time before they could burst. Moreover, the study also shows that the enormous capital inflows in the pre-crisis era played a role in discouraging consecutive Jordanian governments from introducing and implementing any real economic reforms. In the years following the crisis, the ability to introduce such necessary reforms was further frustrated by political bickering and the lack of political will at a time when the country was facing one crisis after the other, specifically as a result of the Arab Spring events and eventually Covid-19. The study contributes to the literature on the aftermath of the GFC in emerging markets. The research concludes by presenting recommendations for reform based on the findings and analysis.