In the late 1980s, depite recent reconomic setbacks, Jordan remained more prosperous than many developing countries, and its citizens were more affluent than their neighbors from other nonpetroleum-exporting countries. Jordan's persistent economic viability was surprising in several respects. Measured both in terms of population and production, the Jordanian economy was one of the smallest in West Asia, according to the United Nations (UN). Its population--not including the West Bank (see Glossary)-- numbered only about 3 million in 1989. Jordan's 1987 gross domestic product was estimated at less than US$5.5 billion. Furthermore, Jordan's natural resources were not nearly as abundant as those of other Middle Eastern nations.

Added to these disadvantages was the incalculable cost to economic development of the regional political and military environment. The economy was dismembered by the 1967 Israeli occupation of the West Bank (see The Military Heritage , ch. 5). Jordanians regarded the loss of this territory not only as a military and political defeat, but also as an enduring economic catastrophe that cost them a large part of their infrastructure, resources, and manpower. Jordan's defense burden, although only average by Middle Eastern standards, was very large by world standards (see Defense Spending , ch. 5). The country's 1987 defense expenditure of US$635 million constituted 22 percent of total government spending.

Despite such handicaps, the economy grew rapidly in the 1970s and continued to grow in the early 1980s. According to UN data, the annual real (inflation-adjusted) growth rate of GDP averaged almost 16.5 percent between 1972 and 1975. The average annual growth rate fell to 8.5 percent between 1976 and 1979, then peaked at almost 18 percent in 1980. Jordan's economic growth appeared more spectacular in percentage terms than in absolute terms because it started from low base figures nonetheless, the pace of economic development was one of the highest in the world during this period. Jordan was not a petroleum exporter, a fact that made this growth rate all the more phenomenal.

Jordan dealt relatively well with the recession in the Middle East triggered by plummeting petroleum prices. Between 1980 and 1985, the average growth rate decelerated to about 4 percent a year, but Jordan's economy was able to sustain this growth rate at a time when other regional economies, such as those of the oilproducers on the Arabian Peninsula, were actually contracting. The boom in transit trade to and from Iraq after the start of the IranIraq War in 1980 accounted for much of the growth. The immunity of the large service sector to demand slowdown also postponed the effects of the regional recession. The government, however, constituted a large component of the service sector. In its role as a major customer and employer, the government sustained an artificial level of growth thro229 rough continued deficit spending and a relaxed fiscal policy. Despite the extra money and demand that the government injected into the economy, GDP growth eventually stagnated in the late 1980s. GDP growth in 1989 was estimated at only 2 or 3 percent.

Data as of December 1989