VZCZCXRO7423
RR RUEHLMC
DE RUEHAM #3173/01 3281029
ZNR UUUUU ZZH
R 231029Z NOV 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 3873
INFO RUEHAD/AMEMBASSY ABU DHABI 1257
RUEHLB/AMEMBASSY BEIRUT 2946
RUEHEG/AMEMBASSY CAIRO 3841
RUEHDM/AMEMBASSY DAMASCUS 4019
RUEHRH/AMEMBASSY RIYADH 2056
RUEHTV/AMEMBASSY TEL AVIV 1415
RUEHJI/AMCONSUL JEDDAH 0845
RUEHJM/AMCONSUL JERUSALEM 5240
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENIUM CHALLENGE CORP WASHDC

UNCLAS SECTION 01 OF 02 AMMAN 003173 
 
SIPDIS 
 
STATE FOR EEB, NEA/ELA, NEA/EX 
 
E.O. 12958: N/A 
TAGS: ECON PGOV SOCI JO
SUBJECT: IN SPITE OF GOVERNMENT INITIATIVES JORDANIANS ARE 
ECONOMICALLY WORSE OFF 
 
REF: A. AMMAN 3121 
      ¶B. AMMAN 2669 
 ¶C. AMMAN 2316 
 ¶D. AMMAN 1392 
 
¶1. (U) Summary: After years of steady GDP growth near 6% and 
inflation near 5%, skyrocketing inflation in Jordan in 2008 has 
dwarfed wage growth and created new challenges for GOJ.  While wages 
have increased an estimated 25% since 2002, the Consumer Price Index 
has increased an average of 44%, and the prices of some commodities 
have increased much more, most notably fuel (143%) and food (65%). 
As a result, King Abdullah II has heightened the focus of his public 
outreach on citizens' financial challenges and in addition to 
housing initiatives and investment in health and education, he 
recently named 2009 the "Year of Agriculture" to draw attention on 
rural economic challenges.  Nevertheless with annual inflation near 
17%, families are seeing their purchasing power fall and they are 
increasingly relying on remittances, family contributions, and 
government aid.  With this inflationary pressure, Jordanians will 
increase their expectations that King Abdullah and the government 
will continue to reach out and look for projects to alleviate the 
local impact of global financial pressures.  End Summary. 
 
¶2. (U) King Abdullah II has spent recent months visiting some of the 
poorest areas in Jordan in acknowledgement of the financial 
hardships facing a growing number of Jordanian families and 
highlighting programs to address their needs.  He named 2008 the 
"Year of Housing" and initiated a program to build homes for 
low-income working Jordanians (ref C).  Similarly, 2009 was recently 
named the "Year of Agriculture" to focus attention on the plight of 
rural agricultural areas and farm families (Ref A).  The King's 
efforts and other Government of Jordan initiatives, including the 
expanded social safety net, are all focused on improving the 
worsening economic situation of average Jordanians, which if not 
addressed can threaten political stability (ref B). 
 
The Good News 
------------- 
 
¶3. (SBU) A comparison of 2002 and 2008 statistics shows improving 
wages and increased employment levels.  Wages in Jordan have been 
rising for the last six years: in 2002, 17.1% of the population 
earned less than $141 per month and in 2008 that percentage had 
dropped to just 4.4%.  Similarly, in 2002, only 12.3% of Jordanians 
in the workforce earned more than $423 per month and in 2008, 30% or 
workers, approximately 400,000 people, earned that much.  Ministry 
of Labor Secretary General Dr. Gazi Shbaikat credits multiple 
increases in Jordan's minimum wage with the increased average income 
from below $280 per month in 2002 to around $350 per month in 2008, 
since minimum wage increases tend to also raise other low wages. 
The minimum wage has nearly doubled from $113 in 2002 to $212 per 
month effective January 2009.  The largest increase in government 
salaries, which impact one-third of the workforce, was the increase 
this year from an average $362 monthly in 2007 to $428 in 2008 
across positions. Government clerks who are at the low-end of the 
pay scale saw their monthly salaries increase significantly from 
approximately $300 monthly to $375. 
 
¶4. (U) Additionally, official unemployment rates fell in the third 
quarter of 2008 to 12%, the lowest level in eight years, and down 
from the high of 15.3% in 2002.  Government officials frequently 
point out that the number of unemployed Jordanians loosely equals 
the number of foreign workers in Jordan.  The majority of these 
foreigners, however, work in construction and hotels or are 
domestics, sectors where starting salaries are close to minimum wage 
and where few Jordanians work for deeply engrained cultural 
reasons. 
 
The Bad News 
------------ 
 
¶5. (U) These positive figures do not, however, tell the whole story. 
 In spite of rising employment rates and salary advances, a 16.7% 
increase in inflation in the Consumer Price Index (CPI) from October 
2007 to October of this year has caused significant financial stress 
for most families, who have seen prices of nearly everything 
increase far faster than wages.  This inflation can be primarily 
attributed to world commodity price increases and to the pegging of 
the Jordanian dinar to the U.S. dollar, whose fall further eroded 
purchasing power.  Food in Jordan, a net importer of consumable 
 
AMMAN 00003173  002 OF 002 
 
 
items, has historically represented 40% of an average family's 
household budget, but this percentage is growing as prices escalate 
(ref D).  Food prices have increased 22% in the last twelve months 
and have increased 65% since 2002.  Dietary staples of beans, 
grains, and cereals have shown even higher price increases. 
Households have struggled further with energy costs, which increased 
54% between 2002 and 2007, as Jordan lost its cheap access to 
regional oil sources, and grew an additional 57% between 2007 and 
2008 with soaring world prices.  Government officials are hopeful 
that the recent decline in world prices for energy and commodities 
will bring financial relief directly to Jordanian families and also 
to the GOJ whose 2009 budget includes $304 million for wheat and 
fodder subsidies and $92 million for some remaining fuel subsidies 
such as products for home-heating.  Another unseasonably cold 
winter, however, would bring new energy and food challenges. 
 
Final Result: Jordanians Are Worse Off 
-------------------------------------- 
 
¶6. (SBU) Shbaikat and Department of Statistics Director General 
Haidar Fraihat agreed that multiple data sources show that in spite 
of rising wages and employment, Jordanians are worse off in 2008 
than in recent years.  Inflation has hurt the average consumer's 
purchasing power and a MOL chart of real wages, those adjusted for 
inflation, showed slight growth between 2002 and 2007, but a sharp 
fall in 2008 to below 2002 levels, clearly showing that Jordanians 
are worse off in 2008 than in 2002.  Fraihat said that his 
department is readjusting its CPI product basket, which reflects 
average purchases, to increase the weight/importance of food and 
reduce the number of luxury products.  The third indicator is that 
in looking at families' total income, remittances from abroad, 
financial support from in-country family members, and governmental 
social safety net payments are all growing as a percentage of total 
income which Shbaikat said was a very bad sign. 
 
¶7. (SBU) Comment:  The King's visits to rural areas demonstrate the 
complex relationship between economic realities and politics in 
Jordan.  While the government sets broad economic policies, given 
the country's tribal history and culture, many Jordanians look to 
the King to set an example of the state caring for its citizens. 
Just as tribal leaders take financial responsibility for those under 
their care, the King is assumed to have similar responsibilities. 
As inflationary pressures weigh ever harder on average Jordanians, 
the expectation that King Abdullah and the government will continue 
to reach out and look for projects to alleviate the local impact of 
global financial pressures will only increase.  End Comment. 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
BEECROFT