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Source: United Nations Special Coordinator for the Middle East Peace Process (UNSCO)
31 December 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 even further below the 4 NIS mark in November. The weakdollar slightly softens the effect of increasing oil prices and could make some imports moreaffordable.

Registered fuel sales in the Gaza Strip rebounded somewhat in December after unprecedented lowsin November. Even though supply of fuel in December dropped if compared with November,internal distribution improved resulting in better registered fuel sales.

The Palestinian CPI continued its steady rise in December 2007. Since July, prices have risennearly 6.5 percent in the oPt (excluding Jerusalem) with food prices having risen by 10 percent inthe Gaza Strip since July. Concerns persist that given the relatively low price increase, sharplydeclining levels of supply of food stuffs are accompanied by an equal decline in demand for food.

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 someexports of agricultural harvests. In December 2007 overall humanitarian supply to the Gaza Stripincreased slightly (6.5 percent), mainly due to an increase in truck movement via the Sufa crossing.The decline of goods movement through Karni continued with only one quarter of all goods crossingvia the Karni crossing.

The siege on Gaza is beginning to have negative economic effects for Israel as well. The Israel-oPttrade balance which had reached almost half a billion per quarter in the early part of 2007, hasdropped 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. Asecond interesting finding is the fact that despite the complete halt of exports from Gaza, total oPtexports 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 localeconomy as well as the ability of the local economy to create new employment. New companyregistrations in the West Bank dropped by 22 percent in December. Compared to pre-Intifada levelsone could conclude that the West Bank economy is running at 30 percent of its pre-Intifada capacity.In Gaza, new company registrations remained at its all-time low of zero.

Similarly to new company registrations, the area licensed for new construction indicator shows the same trends in that construction in Gaza is near total collapse while in the West Bank construction activity is significantly lower than during the pre-Intifada period. The reason for the large increase in construction as suggested by the data for December is that all non-completed construction are resubmitted for licenses by year end to ensure that new licenses will be issued for the next year.

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 is used as a proxy indicator for perceptions of economic progress (increasing use of bank credit, particularly in the main productive sectors) or decline (decreasing use of bank credit) - the Palestine Monetary Authority provides adjusted monthly data once per every three months. The last six months of 2007 show a distinct decline in the use of bank credit, a trend that is particularly evident during Q4-2007 in the main productive sectors (manufacturing, construction, general trade). In contrast, the use of bank credit increased by over 32 percent in the financial services sector, most likely as a preventative effort by banks to stave off potential implications of Israeli bank’ threats to cut off all dealings with Palestinian banks. 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. The ability of the PA to resume regular salary payments will have had some impact in the drop-off of loans.

Disaggregating bank credit by the borrowing entity shows that consumer lending has declined significantly in the third quarter of 2007 and has continued to drop in the fourth quarter. 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 fourth quarter indicates a continued sizeable increase in private sector deposits (both in terms of public and private sector bank deposits). Compared with January 2007, bank deposits in December 2007 show an increase of 18.3 percent.

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. Since September 2006, this ratio has steadily declined (by over 26 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 and fourth quarter signals heightened concern with regard to overall economic performance, most likely due to the events in Gaza since June 2007.

Similar to bank credit and deposits, data on the Palestinian stock exchange is used as a proxy indicator of Palestinian perceptions vis-à-vis the state of the national economy. The data for December 2007 shows that overall trade continues to slow down while traders appear to prefer high value and relatively stable stocks. The Al-Quds index grew by just under 1 percent.

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