Amid rapid economic changes and successive global crises, financial stability emerges as a fundamental element to ensure the health of the national economy. The overall financial stability index is a vital tool to assess this stability, measuring the financial system’s ability to face challenges and ensure continuous growth. This index ranges from 0 to 1, where high values reflect strong stability, while low values indicate risks that may negatively impact the economy. By analyzing this index, policymakers and investors can make informed decisions that strengthen the financial system’s resilience and protect it from disruptions.

According to the 2024 Financial Stability Report issued by the Central Bank of Jordan, the overall financial stability index shows a remarkable improvement, reaching 0.60. This improvement reflects increasing stability in the financial system, attributed to several factors, including a notable rise in the macroeconomic index, which increased from 0.66 in 2023 to 0.70 in 2024. Additionally, the reduction in individual debt burden and inflation rate contributed to enhancing stability, reflecting the government’s efforts to improve economic conditions.

Historically, the index in Jordan has witnessed significant developments, starting at 0.64 at the end of 2007, before the global financial crisis. However, with the economic deterioration caused by this crisis, the index dropped to 0.50 at the end of 2008, clearly showing the risks faced by the financial sector. Nevertheless, the following years saw some improvement, with the index rising again to 0.64 at the end of 2009, giving hope for economic recovery.

However, the period between 2010 and 2012 witnessed a major shift, with the value declining to 0.36, the lowest level recorded by the index. This decline was a direct result of the repercussions of the Arab Spring events and the refugee crisis, negatively affecting Jordan’s economy. Despite these challenges, signs of recovery began to appear in 2015, with the index rising to 0.57, reflecting improved economic conditions. Yet challenges persisted, as the index fell again to 0.46 in 2018, indicating ongoing economic pressures.

In 2019, the index recorded a notable improvement, rising to 0.55, amid increased liquidity ratios and capital adequacy in banks. With the emergence of the COVID-19 pandemic in 2020, the economic situation was severely affected, leading to a decline in the index to 0.44. However, conditions began to improve again, with the index rising to 0.47 and 0.50 in 2021 and 2022 respectively, indicating gradual recovery.

Furthermore, Jordan ranked first among 23 countries in the banking sector stability index, reflecting significant improvement in the banking system in this area. This achievement reflects the strength of the banking sector and its adherence to best international practices, highlighting the Jordanian financial system’s ability to adapt to challenges and seize available opportunities.

The overall financial stability index in Jordan reflects the financial system’s ability to recover, and enhancing this stability is essential to support sustainable development. It is hoped that the coming year will witness further improvement reflecting more progress for Jordan’s economy.