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Source: United Nations Special Coordinator for the Middle East Peace Process (UNSCO)
30 November 2007

Since 1996 UNSCO has continually monitored and reported on socio-economic conditions in the occupied Palestinian territory and in the process established an extensive socio-economic database.

UNSCO does not create raw data but rather uses available data which, in the occupied Palestinian territory is relatively abundant. However, the data that is available tends to remain dispersed and is not always automatically shared between institutions. The objective of the database is to bring together in one place a wide variety of data on socio-economic conditions and by doing so present a broader, more detailed perspective on socio-economic conditions.

The purpose of this report is to: 1) broaden the access to this database through publication of the most recent data gathered; and 2) provide
readers with up to date information on socio-economic conditions in the occupied Palestinian territory.

The report is divided into three sections:

Section 1 consists of a one-page fact sheet which provides a snapshot view of the socioeconomic situation of the current and previous reporting period and for reference purposes provides base line figures for the period just prior to the outbreak of the second Intifada.

Section 2 and 3 report on the Macro-economic and the Private sector and banking modules of the UNSCO database. They provide data on the last six reporting periods for each indicator as well as base line data. In addition, some initial analysis on observed trends is given below each table.

1 For a more detailed report on sections C (Macro-economy) and D (Private sector), see the attached UNSCO reports
2 CPI Base year 1996 = 100
3 Number of truckloads. MoNE data does not include aggregates or aid flows.
4 Adjusted unemployment is calculated by adding discouraged workers (i.e. unemployed but no longer seeking work) to the ILO standard.
5 Effective closure days are calculated by adding all days when a crossing was fully or partially closed minus weekend and holidays.

For further information please contact: Ramallah: Bushra Mukbil; Gaza Strip: Raed Raqeb

The US$-NIS exchange rate dropped well below the 4 NIS mark in November. The weak dollar slightly softens the effect of increasing oil prices and could make some imports more affordable.

Registered fuel sales in the Gaza Strip dropped to unprecedented lows in November. Besides declining demand due to the absence of economic activity, the Israeli imposed reduction in supplies and a slowdown in internal distribution all contributed to this development.

The Palestinian CPI continued its steady rise in November 2007. Since June, prices have risen nearly 6 percent in the oPt (excluding Jerusalem) with food prices having risen by 11.5 percent in the Gaza Strip. It should be noted here though that the food price increase is considered relatively
mild given the sustained reduction in the supply of food products to the Gaza Strip. Therefore, one conclusion could be that both supply and demand are declining. If so, this would signal a serious effect of the ongoing Israeli imposed siege that will have long-lasting and structural effects on the health situation of the Gaza population.

Truck movement to Gaza has been restricted to humanitarian supplies only since 12 June 2007. Exports were stopped altogether at the same time but were restarted in November with some exports of agricultural harvests. In November, the trend of Kerem Shalom replacing Sufa as the
main entry point for humanitarian supplies continued with over 55 percent of all imports going through Kerem Shalom.

The siege on Gaza is beginning to have negative economic effects for Israel as well. The Israel-oPt trade balance which had reached almost half a billion per quarter in the early part of 2007, has dropped significantly in the past two quarters. Since the first quarter of 2007 the balance of trade
dropped by 15 percent primarily as a result of declining goods exports from Israel to the oPt. A second interesting finding is the fact that despite the complete halt of exports from Gaza, total oPt exports to Israel remained at the same level as during previous quarters.

For further information please contact: Ramallah: Bushra Mukbil; Gaza Strip: Raed Raqeb

The number of new company registrations is used as a proxy indicator for the vitality of the local economy as well as the ability of the local economy to create new employment. While the number of new company registrations in the West Bank continued to slowly increase in November 2007, in Gaza this indicator declined to zero. At no point since the Ministry of National Economy started registering new company registrations has this indicator been so low.

Similarly to new company registrations, the area licensed for new construction indicator shows the same trends. A slight increase in the West Bank and a sharp reduction in the Gaza Strip. The area licensed for new construction in November 2007 stands at 6 percent if compared to pre-Intifada
levels. It is also interesting to observe that most new construction in the West Bank is located in the Southern and Middle part of the West Bank while in the North, new construction is declining.

The overall slump in new construction is not yet reflected in the PCBS data that dissagregates new construction licenses by type of construction as this data is available only on a quarterly basis.

Data on bank credit indicates that intra-sectoral trends have not changed much over the past six periods (the Palestine Monetary Authority provides adjusted monthly data once per every three months). In relative terms, we note a decline in credit in the general trade sector and a
simultaneous increase in the use of credit by the transportation sector. A possible explanation for these developments could be the introduction of back-to-back systems at goods crossing points between Israel and the West Bank. While the back-to-back system will increase transport needs
inside the West Bank it will equally increase transaction costs of trade and thus negatively affect the profit margin of traders. Bank credit to the public sector has more than tripled if compared with the pre-Intifada period.

Disaggregating bank credit by the type of credit, confirms the relative stability of the banking sector. Even the previously observed trend of overdrafts replacing formal loans has been arrested in the third quarter of 2007. Loans currently represent 63 percent of all credit extended compared to only 41 percent in the pre-Intifada period.

Disaggregating bank credit by the borrowing entity shows that consumer lending has declined significantly in the third quarter of 2007. The most likely reason for this development is the continued risk-adverse stance of Palestinian banks combined with the restart of regular payment of
PA salaries which has allowed a number of PA staff to pay off existing loans and has reduced the demand for credit.

Unlike the relative stability of bank credits, bank deposits data for the third quarter indicates a relatively sizeable increase in private sector deposits (an increase of 7.8 percent if compared with the second quarter).

In a normal functioning economy an increase in the loans versus deposits ratio would be a good sign as monies are not saved but invested or consumed, each of which is a stimulant for the economy. Over the past year, this ratio has steadily declined (by 19 percent) in the oPt signaling
little optimism concerning the Palestinian economy which limits appetite for domestic investment and thus increases deposits. The sharp drop in the third quarter signals heightened concern with regard to overall economic performance, most likely due to the events in Gaza since June 2007.

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