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COVID-19 in Jordan: Impacts on Production, Household Income & Food Systems

Prepared by Dalia Elsabbagh1, Mariam Raouf1, Manfred Wiebelt2

1. International Food Policy Research Institute
2. Kiel Institute for the World Economy
Last updated: 2 September 2020

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COVID-19 in Jordan: Impacts on Production, Household Income & Food Systems

  1. 1. Dalia Elsabbagh1, Mariam Raouf1, Manfred Wiebelt2 1. International Food Policy Research Institute 2. Kiel Institute for the World Economy Last updated: 2 September 2020 Contact: Dalia Elsabbagh (d.elsabbagh@cgiar.org) or Mariam Raouf (m.raouf@cgiar.org) COVID-19 in Jordan Impacts on Production, Household Income & Food Systems Financial support from We gratefully acknowledge the financial support of the United States Agency for International Development (USAID), which made this study possible under the project “Evaluating Impact and Building Capacity” (EIBC) that is implemented by IFPRI. The information provided in this paper is not official U.S. government information and does not represent the views or positions of the United States Agency for International Development or the U.S. Government. Any opinions stated herein are those of the authors and are not necessarily representative of or endorsed by IFPRI and the Ministry of Planning and Economic Development.
  2. 2. Lockdown Imposes Heavy Economic Costs • National GDP is estimated to fall by 22.6% during a 10-week lockdown (around US$ 0.9 bil. in lost GDP) • Food system is adversely affected by falling consumer & export demand (38.4% agri-food GDP decline, despite exemptions) Source: Jordan SAM Multiplier Results Economic impacts during a 10-week lockdown period 22.6 38.4 0.9 Percentage decline in national GDP Percentage decline in agri- food system GDP Decline in national GDP in US$ billions
  3. 3. COVID-19 Outbreak & Lockdown Policies in Jordan 1
  4. 4. 0 10 20 30 40 50 60 70 80 90 First confirmed case in Jordan The defense law was activated: • Enforce strict curfews, close businesses, and restrict people movement within the country • Launch of a public awareness campaign to inform the public on examination and treatment facilities • Allowing only food and dairy industries and some export-oriented industries to continue operating • Air travel restricted • Trading on Amman Stock exchange was suspended till May 10, 2020 • The Central Bank of Jordan allowed delayed payments of loan instalments by companies; & reduced the interest rate Private-sector allowed to defer part of the social security contributions starting from 1 March 2020 for up to three months, decreasing to a rate of 5.25% suspends all court dates, appointments for lawsuits and prosecutions • Prime Minister established a coronavirus relief fund "Himmat Watan", to which local and foreign donations will be deposited to support the Kingdom’s efforts to eradicate COVID-19. • Allocated additional JD 50 million for purchases of health equipment and supplies • Institution of a temporary cash transfer program for the unemployed and self-employed - JD 81 million Start of phase-out easing of the lockdown started: • April 6: factories located in industrial zones were allowed to resume operations • April 17: organizing schools and university education, and vocational training and student evaluation mechanisms remotely • April 21: work partly resuming for selected sectors • April 30: resumption of most commercial activities • Jordan lifted most lockdown measures • Government allowed companies in hard-hit sectors to cut employees’ May and June salaries by 30% • Transport between governorates resume, night curfews shortened, hotels and cafes can re-open, along with sporting events with no spectator effective • Operation of “Aman” application alerting users when they meet someone who has COVID-19 Air travel arrival restricted except for residents and 20 announced countries residence who have medical certificate test, and a full medical insurance coverage COVID-19 Cases & Policy Timeline
  5. 5. Sectors Affected by Lockdown Policies (1) Sector Lockdown restrictions or exemptions in targeted regions Directly Affected? Agriculture • Movement restrictions occurring at start of planting season • Suspended development projects Some Mining & crude oil • Continuing to operate (essential sector) • Lower oil prices & export demand (small supply effects to date) Minimal Manufacturing • Food processing & medicines exempted (essential sector) • Nonfood producing companies closed • Port congestion constraining access to inputs Some Utilities • Electricity & water distribution exempted (essential sector) Minimal Construction Nationwide • Many public works programs reduced in affected areas • Local curfews & border closures reducing activity elsewhere Some Wholesale & retail trade services • Retailers of essential goods exempted (but 10am-2pm trading times) • Wholesale not exempted Some Transportation, storage & cargo Nationwide • Rail & air travel closed; freight transport partly restricted • Demand for urban passenger transit reduced • Port cargo handling & storage exempted Some Hotels & food services Nationwide • Restaurant dining banned or severely limited • Limited delivery options for food or other products High
  6. 6. Sectors Affected by Lockdown Policies (2) Sector Lockdown restrictions or exemptions in targeted regions Directly Affected? Banking, finance & insurance • Money transfer services exempted (essential) • Banks operating with essential staff only • Other financial institutions closed or teleworking (e.g., insurance) Minimal Professional & business services • Almost all closed or teleworking (e.g., legal, accounting services) • Activities involving in-person field visits affected (e.g., engineers) Some Public admin & law enforcement • Public services & agencies remain open, but most staff teleworking • Public & private security services exempted (essential) Some Education services • Nationwide • All public schools closed without much scope for online delivery • Private schools closed with some online materials Health services • Health services exempted (essential) • Elective operations reduced but rising number of COVID patients Minimal Sports & entertainment Nationwide • Most sports & outdoor entertainment banned • Some activities operating (e.g., newspapers, radio & TV) Some Other services • Domestic workers cannot commute, but live-in workers less affected • In-person religious gatherings banned • Major disruptions to informal repair firms due to market closures Some
  7. 7. Global & Other Nationwide Shocks Sector Lockdown restrictions or exemptions in targeted regions Directly Affected? Export demand Nationwide • Sizable decline in demand for agricultural exports • Reduced international tourism & business travel to Nigeria High Remittances Nationwide • Declines in the value of remittances sent by national working abroad Some Government revenues Nationwide • Fall in tax revenues due to decline in economic activity • Lower trade tax collections due to reduced import demand Some See detailed sector-level assumptions about production & demand shocks in Annex at the end of slide deck
  8. 8. Measuring Economic Impacts 2
  9. 9. Economywide Multiplier Analysis • Lockdown policies & shocks have direct impacts on the operation of certain sectors (e.g., closing businesses, restricting travel, etc.) • But it also generates indirect impacts on other sectors involved in supply chains (i.e., input suppliers & downstream users) • Multiplier analysis uses sector input-output data to measure direct & indirect impacts throughout & across supply chains (incl. impacts on GDP, jobs & household incomes) • Jordan model based on 2015 SAM & 2013 household survey data (results scaled to 2019 GDP & employment levels)
  10. 10. Impact Channels & Shocks • Lockdowns are simulated using a range of impact channels • Shocks to each channel are imposed on the model & impacts are simultaneously traced across all supply chains • Multiplier model separates entire Jordanian economy into 86 sectors (shocks are calculated bottom-up using supply-use data for 84 goods & services) • Size of shocks is estimated by IFPRI’s in-country staff & collaborators (see Annex) Impact channels used to replicate lockdowns 1 Direct restrictions on farming 2 Limiting mining operations 3 Closing non-essential manufacturing operations 4 Disruptions to energy and water supply 5 Limiting construction activities 6 Closing non-essential wholesale/retail trade 7 Transport/travel restrictions 8 Closing hotels, bars and restaurants 9 Closing non-essential business services 10 Government work-from-home orders 11 Closing all schools in the country 12 Disruptions to hospitals and clinics 13 Banning sports & other entertainment 14 Domestic workers & other services 15 Reduced export demand 16 Falling foreign remittances 17 Falling government revenues
  11. 11. Scenarios 1. Impacts during only the full lockdown period • In Jordan this is 10 weeks running late-March to end of May 2. Impacts for rest of 2020 as lockdowns are lifted each quarter • We will compare a faster vs. slower easing of restrictions 1 2 Lockdown Period Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Q1 Q2 Q3 Q4 Easing Restrictions in Q2 and Q3 Further Easing of Restrictions in Q4
  12. 12. Economic Impacts During the Ongoing Lockdown Period 3
  13. 13. GDP Losses During Lockdown National GDP drops 22.6% during the 10 weeks lockdown (most economic losses occur in the industry & services sectors) Source: Jordan SAM Multiplier Results Change in total GDP during lockdown period (%) Change in total GDP by duration of lockdown (US$ mil.) -22.6% -16.6% -14.0% -29.5% Total Agriculture Industry Services -$906.5 -$26.9 -$229.8 -$649.9 Total Agriculture Industry Services
  14. 14. Sources of GDP Losses Reduced export demand accounts for around half of GDP losses Contribution of lockdown restrictions & shocks to loss in total GDP during lockdown (sums to 100%) (mainly driven by falling hotelry revenues and declining agricultural exports ) Falling remittances reduce household incomes & consumption Large knock-on effect on goods producing sectors (incl. suppliers of inputs to all sectors) Source: Jordan SAM Multiplier Results 46.8 14.1 11.1 11.1 6.1 3.2 3.1 3.1 1.9 0.5 0.0 -0.9 -10 0 10 20 30 40 50 Reduced export demand Closing non-essential wholesale/retail… Closing non-essential business services Transport/travel restrictions Falling foreign remittances Banning sports & other entertainment Closing non-essential manufacturing… Limiting construction activities Direct restrictions on farming Domestic workers & other services Closing hotels, bars and restaurants Falling government revenues Contribution to change in total GDP (% | sums to 100%)
  15. 15. Impacts on the Agri-Food System Food supply is exempt from most restrictions, but it is still indirectly affected by falling consumer incomes & other shocks Change in agri-food GDP during lockdown period (%) Change in agri-food GDP during a 10-week lockdown period (US$ mil.) (food services is directly affected by the closing of hotels, restaurants & bars, but this is a small component of the overall agri-food system) Source: Jordan SAM Multiplier Results -38.4% -16.6% -5.0% -11.5% -90.8% -100.0% -80.0% -60.0% -40.0% -20.0% 0.0% Agri-food system Agriculture Agro-processing Food trade and transport Food services Hundreds -$343.4 -$26.9 -$15.9 -$10.8 -$289.9 Agri-food system Agriculture Agro-processing Food trade and transport Food services
  16. 16. Unpacking Agricultural GDP Impacts Change in GDP during lockdown (%) Fruits and Vegetables are the largest food group and agric. subsector in Jordan Export crops hurt by falling export demand & input supply disruptions Source: Jordan SAM Multiplier Results -16.6 -23.3 -4.8 -1.9 -2.1 -32.7 -15.7 -14.2 -15.5 -10.8 -10.3 -1.6 -35 -30 -25 -20 -15 -10 -5 0 Agriculture Crops Cereals Pulses & oilseeds Root crops Fruits & vegetables Traditional export crops Livestock Meat & eggs Dairy Forestry Fishing Change in sector GDP (%)
  17. 17. Unpacking Food Processing GDP Impacts Change in GDP during lockdown (%) Not entirely exempted by lockdown restrictions Processed foods are more intensively consumed by urban households, who are affected badly by lockdown (see later slides) Export-oriented crops are typically processed before being exported Source: Jordan SAM Multiplier Results -6.2 -5.3 -4.5 -11.3 -1.8 -11.9 -2.7 -9.9 -3.4 -15 -10 -5 0 Food processing Meat Dairy Fruits & vegetables Fats & oils Cereal milling Sugar refining Other foods Beverages & tobacco Change in sector GDP (%)
  18. 18. Impact on temporary Job losses Change in Employment during lockdown period (%) Source: Jordan SAM Multiplier Results Reduction in economic activity could lead to a temporary job losses of around 477 thousands jobs, especially in the Services sector -19.5 -14.3 -23.6 -21.2 -14 -79 -384 -477 -600 -500 -400 -300 -200 -100 0 Agriculture Industry Services total Change during lockdown (%) Percentage change Number of workers (thousands)
  19. 19. Impacts on Household Incomes Higher-income & urban households experience larger income losses But incomes of rural & lower-income households also fall (lockdowns target cities; nonpoor more likely to work in manufacturing & services) (mainly due to effects of food system disruptions on smallholder farmer incomes, the closure of urban informal markets where urban poor often work, & lower remittances from abroad) Source: Jordan SAM Multiplier Results Change in household incomes during lockdown (%) -29% -23% -27% -29% -29% -31% -27% -29% All households Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5 Rural Urban
  20. 20. 4 Economic Impacts Under Fast & Slow Easing of Restrictions
  21. 21. Easing of Restrictions Predicting Jordan’s “post-lockdown” period is challenging Consider two highly stylized scenarios: Faster easing: Economy rebounds strongly in Q3 & largely returns to normal by Dec 2020 Slower easing: Modest rebound in Q3 with productivity in Q4 still below pre-lockdown levels Faster easing Slower easing Global shocks Q1 Jan No shocks in pre-COVID-19 period Feb Mar Lockdown period starts late-March & last 10 weeks Remittances & export demand decline from late March onwards Q2 Apr May Jun Q3 Jul Losses reduced by 99% Losses reduced by 95% Shocks reduced by 90% Aug Sep Q4 Oct Losses reduced by 99.5% Losses reduced by 99% Shocks reduced 95% Nov Dec
  22. 22. GDP Impacts with Recovery Scenarios Source: Jordan SAM Multiplier Results Change in quarterly & annual national GDP with fast or slow easing of restrictions (changes are relative to a no-COVID growth scenario) National GDP is 5.7 - 7.4% lower over 2020 as a result of COVID-19 -0.3% -21.1% -1.4% -0.6% -5.7% -23.7% -2.6% -1.0% -6.8% -24.0% -3.9% -1.8% -7.4% Q1 Q2 Q3 Q4 2020 Quarterly averages Annual Faster easing & recovery Gradual recovery slow recovery
  23. 23. A Detailed Assumptions About Production & Demand Shocks
  24. 24. Channels, Shocks & Affected Sectors (1) Type of restriction or global shock Major sectors affected2 Size of shock Detailed subsectors affected by shock2 Direct restrictions on farming Agriculture (A) -10% Crop/animal production, hunting, related service activities (D01); forestry, logging (D02); fishing, aquaculture (D03) Limiting mining operations Mining, quarrying (B) 0% Coal, lignite (D5); crude petroleum, natural gas (D06); metal ores (D07); quarrying (D08); mining support service activities (D09) Closing non-essential manufacturing operations Manufacturing (C) 0% Food products (D10); coke, refined petroleum (D19); pharmaceuticals, medicinal chemicals (D21); electromedical equipment (G266) -15% Beverages, tobacco (D11-12); textiles, clothing, leather (D13-15); wood, paper, printing (D16-18); chemicals, rubber, plastics (D20-21); non-metallic minerals (D23); metals (D24- 25); equipment, machinery (D26-28 excl. G266); vehicles, transport equipment (D29-30); furniture (D31), other manufactures (D33) Disruptions to energy and water supply Electricity, gas (D); water supply (E) 0% Electricity, gas, steam supply (D35); water collection, treatment, supply (D36); sewerage, waste collection/remediation (D37-39) Limiting construction activities Construction (F) -10% Construction of buildings (D41); civil engineering (D42); specialized construction activities (D43) Closing non-essential trading activities Wholesale/retail trade (G) -35% Agricultural raw materials, live animals (G462); agricultural machinery, equipment, supplies (C4653); food, beverages, tobacco, incl. stalls & markets (G463 G471-472 C4781); construction materials, hardware, plumbing, heating equipment (C4663); automotive fuels (G473) Motor vehicle trade/repair (D45); wholesale trade (D46 excl. G462-463 C4653 C4663); retail trade (D47 excl. G471-472 G47 C4781) Transport/travel restrictions Transportation, storage (H) -35% Postal/courier activities (D53); transport via pipeline (G493) Sea/coastal/inland water transport (C5011-5012 C5022); transport support (G522) Freight rail/road/air transport (C4912 C4923 G512); warehousing/storage (G521) Urban/suburban passenger/other land transport (C4911 C4921-4922) Passenger air transport (G511) Government work-from- home orders Public administration, defense (O) 0% Public administration, defense, compulsory social security (D84) Closing hotels, bars and restaurants Accommodation, food services (I) -85% Accommodation (D55); food/beverage service activities (D56)
  25. 25. Channels, Shocks & Affected Sectors (2) Type of restriction or global shock Major sectors affected2 Size of shock Detailed subsectors affected by shock Closing non-essential business services Information, communication (J); finance, insurance (K); real estate (L); professional/ scientific/technica l activities (M); administrative/ support services (N) 30% Publishing activities (D58); programming/broadcasting activities (D60); telecommunications (D61); computer programming/consultancy activities (D62); information service activities (D63); financial services, insurance, pension funding, auxiliary services (D64-66); real estate activities (D68); security and investigation activities (D80) -15% Accounting, bookkeeping, auditing, tax consultancy (G692); head offices, management consultancy (D70); scientific research/development (D72); advertising, market research (D73); other professional/scientific/technical activities (D74); -15% Legal activities (G692); architectural/engineering activities (D71); veterinary activities (D75) -15% Motion picture/video/television program production, etc. (D59); renting/leasing activities (D77); employment activities (D78); travel agencies, tour operators (D79); building services, landscape activities (D81); office administrative, office support, other business support activities (D82) Closing schools Education (P) Pre-primary and primary education (G851) Secondary education (G852); Other education (G854) Higher education (G853); Educational support activities (G855) Disruptions to hospitals and clinics Human health, social work (Q) Human health activities (D86); residential care activities (D87); social work activities without accommodation (D88) Banning sports & other entertainment Arts, recreation, entertainment (R) -20% Creative/arts/entertainment activities (D90); libraries, archives, museums, other cultural activities (D91); gambling, betting activities (D92); sports, amusement/recreation activities (D93) Domestic workers & other services Other service activities (S); households as employers (T); extraterritorial organizations (U) -20% Extraterritorial organizations/bodies (D99) -20% Membership organizations (D94) -20% Other personal services (D96); domestic workers/personnel (D97); Other production activities of private households for own use (D98) -20% Repairing computers & personal/household goods (D95)