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Source: United Nations Special Coordinator for the Middle East Peace Process (UNSCO)
30 April 2011




SOCIO-ECONOMIC REPORT
April 2011




Since 1996 UNSCO has continually monitored and reported on socio-economic conditions in the occupied Palestinian territory (oPt) and, in the process, established an extensive socio-economic database. UNSCO does not produce primary data but rather makes use of available data, that in oPt are relatively abundant. The information that is available, however, often remains dispersed and is not automatically shared between institutions. The objective of the database is to collate a wide range of social and economic indicators in one location, and, through the report, present a broad perspective on socio-economic conditions in oPt.

The purpose of the present report is to: 1) broaden the access to the information contained in the 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 seven sections, as follows:

Section I. consists of a one-page fact sheet that provides a snapshot view of the socio-economic situation for the current and previous reporting periods.

Sections II. and III. report on the macro-economic and fiscal situation, and sections IV. and V. give an overview of developments in the banking and private sectors, respectively. Section VI. deals with trade, and Section VII. is dedicated to issues on Gaza.

Two annexes provide detailed reference information. Annex A presents detailed statistical reference tables, and Annex B lists the main socioeconomic terms used in this report along with their corresponding definitions.

Topics of current interest are analyzed in-depth in periodic “Supplements”.

Most sections provide data on the six preceding reporting periods for each indicator and, for comparison purposes, data for a reference period immediately before the Al-Aqsa intifada, which started in September 2000, or the closest time period available.

Note: The data for the West Bank and oPt in this report do not include occupied East Jerusalem unless otherwise specified.

UNSCO
Office of the United Nations Special Coordinator for the Middle East Peace Process
For further information or to be added to the mailing list please contact:
UNSCO Ramallah:
Astrid Marschatz marschatz@un.org
UNSCO Gaza Strip:
Raed Raqeb raqeb@un.org
The UNSCO Socio-Economic Report is also
accessible on www.unsco.org


I. Socio-Economic Fact Sheet April 2011


a/ Data not available.
b/ Preliminary data.
c/ Includes data for occupied East Jerusalem.
d/ MoNE data for August 2000 do not include aggregates or aid flows.
Sources: PCBS: production, prices, labor market; MoF: public sector; PMA: banking sector; MoNE: new company registrations; Engineering Offices and Consulting Firms: area licensed for new construction; MoNE and General Petroleum Corporation: Gaza truck movement; UNSCO: closure and Gaza truck movement.

II. MACRO-ECONOMIC SITUATION
II.a Production
Real GDP grew by 2.8% in Q4/2010, yielding an annual growth rate of 9.3%. This recent economic growth was experienced only in the West Bank, where real GDP was 5.5% higher in Q4 than in Q3. In the Gaza Strip, on the other hand, real GDP fell by 5.2% during the quarter, ending a period of expansion that lasted for seven quarters. Despite higher annual growth in Gaza than in the West Bank (15.1% compared to 7.6%), quarterly GDP in Gaza continues to be less than a third the GDP in the West Bank.


Real GDP ($US million)


Source: PCBS.
Note: Base Year is 2004.

Agriculture in oPt
Agriculture was the most dynamic sector of the economy in 2010, expanding by 36%. Its estimated real value added reached US$360 million, equivalent to 6% of GDP. Its contribution to the total economy was greater in Gaza, 9%, than in the West Bank, 5%. In terms of employment, agriculture absorbed 12% of those working in 2010. This sector was a more important source of employment in the West Bank, where 14% of workers were employed in agriculture, than in Gaza, where this sector offered employment to 8% of workers. Women also depend more on agriculture for employment, as 21% of working women were active in this sector, compared to only 9% of working men.
Preliminary results of PCBS‟s 2010 Agriculture Census identify 111,458 agricultural holdings in oPt, of which 91,028 were in the West Bank and 20,430 were in the Gaza Strip. Hebron, Ramallah and Al-Bireh, Nablus, Tulkarm and Jenin had the highest number of agricultural holdings.

A total of 960,321 dunums were cultivated in 2010, that is, 16% of the territory. The same proportion (16%) of land was cultivated in the West Bank, but with marked differences between governorates. Tulkarm had the highest proportion of land area that is cultivated, 34%, followed by Qalqilya with 33% and Jenin with 30%. At the other extreme, less than 5% of land area was cultivated in Jerusalem, Jericho and Bethlehem. In Gaza, 21% of the land area was cultivated, but the differentials between governorates were smaller than in the West Bank. In particular, Deir Al-Balah had the highest proportion, 25%, and Gaza the lowest, 16%.

Number of agricultural holdings and land area that is cultivated
2010

Note: The boundaries and the names shown and the designations used on the map do not imply official endorsement or acceptance by the UN.
Source: PCBS, Preliminary Estimates of Quarterly National Accounts, Labor Force Survey Annual Report 2010, 2010 Agriculture Census.
Note: For the data on GDP and labor, agriculture includes hunting and fishing.

Change in Production in Industrial Activities According to IPI

Source: PCBS.


The Industrial Production Index (IPI), used to gauge short term changes in productive activity, increased by 5.9% in March 2011. This rise in productive activity is traced to the water supply and electricity industry (whose relative share is 14.9%) and the manufacturing industry (with 80.5% relative share). The mining and quarrying

industry (4.6% relative share), on the other hand, registered a decrease during the month according to the IPI.


II.b Prices
Consumer Price Index (2004 = 100)
The Consumer Price Index (CPI), used to measure inflation, reflects almost no change in prices in April 2011 compared to the previous month, but an inflation rate of 3.5% in the year since April 2010. Year-on-year inflation was highest in East Jerusalem (5.3%), followed by the West Bank (3.9%). The greatest price rises in April 2010 were in restaurants, cafes and hotels, and textiles, clothing and footwear. The largest price decreases were in medical care, and food and soft drinks.
Source: PCBS.

The rise in CPI in the West Bank in April is traced mainly to increases in the price of restaurants, cafes and hotels, furniture and household goods, and miscellaneous
Change in Consumer Price Index by Major Expenditure Groups April 2011


Source: PCBS.
goods and services. The cost of food and soft drinks fell in the West Bank during the month.

In East Jerusalem the CPI was basically unchanged in April, although the price of textiles, clothing and footwear rose considerably, followed by restaurants, cafes and hotels. The costs of medical care, furniture and household goods, and restaurants, cafes and hotels registered the biggest drops in East Jerusalem in April.

In the Gaza Strip the CPI declined by 0.6% during the month of April. The most significant decreases in prices in Gaza during the month were in food and soft drinks, and furniture and household goods. Recreational, cultural goods and services exhibited the greatest price increase during the month, followed by communications.

The decomposition of the CPI into indices for food and non-food items reveals a greater increase in the cost of food items in the last twelve months (3.8%) than in non-food items (3.2%). In addition, the price of food items shows higher levels of instability, with greater month-to-month fluctuations, than the price of non-food items.


Change in Prices

Source: UNSCO based on PCBS.
Note: The category 'food items" includes food and soft drinks, and the category „non-food items includes all the other items used to compute the Consumer Price Index, namely: alcoholic beverages and tobacco; textiles, clothing and footwear; housing; furniture and household goods; medical care; transportation; communications; recreational, cultural goods and services; education; restaurants, cafes and hotels; and miscellaneous goods and services. The relative weights used to compute the price indices for food and non-food are based on those used for the CPI.

II.c Exchange rates
The NIS increased in value against US dollar and was almost constant against the euro. The JOD weakened against the euro, while the JOD's exchange rate to the US dollar remains constant at 0.71.


Average Monthly Exchange Rates


Source: PCBS.


II.d Labor market
Labor force participation decreased in absolute and relative terms in Q1/2011. Whereas the labor force expanded by almost 10,000 persons in the Gaza Strip during the quarter, in the West Bank it contracted by almost 14,000 persons. The labor force participation rate of both men and women decreased by about half a percentage point during the quarter.


Labor force participation rate (%)
(Labor force in thousands)


Source: PCBS.


Both the employment-to-working age population ratio and the labor force participation rate continue to be higher in the West Bank than in Gaza, and they are about four times higher for men than for women.

Labor Force Participation Rate and Employment-to-Working Age Population Ratio
Q1/2011

Total Unemployment Rate and Unemployment Rate
20-24 yrs
Q1/2011


Source: PCBS.




Unemployment decreased by one percentage point in Q1/2011, but still affects 22% of the labor force, and 38% of those between 20 and 24 years of age. The fall in the jobless rate can be traced to a significant reduction in unemployment, from 37% to 31%, in Gaza. In the West Bank, on the other hand, unemployment remained at 17%.
Considerable gender disparities in unemployment emerged during Q1/2011. Whereas 23% of economically active men and women were unemployed in Q4/2010, the rate for men fell to 21% in Q1/2011, but it increased to 27% for women.

Average daily wages (excluding those employed in Israel and settlements) were basically unchanged at NIS79 in Q1/2011. Average wages in the West Bank fell by NIS1 during the quarter, but those in Gaza rose by NIS5. Similarly, average wages in the private sector were static, while those in the public sector rose by NIS3, thus widening the existing gap.


Average Daily Wages (NIS)


Source: PCBS.

IV. BANKING SECTOR
Total value of Bank Credit and Distribution
by Borrowing Entity
Information on bank credit, particularly credit to productive sectors, gives an indication of economic progress and business confidence. Data for oPt show a gradual increase in the use of credit over time, and in Q1/2011 the total value of credit increased by more than 9% to reach US$3,155 million. The proportion of credit destined to businesses increased by one percentage point and represented 59% of the total in Q1/2011. The proportion of credit absorbed by consumers remained unchanged at 29% during the quarter, and that corresponding to public services decreased by one percentage point to 12%.

Source: PMA.


Most of bank credit is in the form of loans, and their size relative to total bank credit grew by one percentage point to reach 70% in Q1/2011. At the same time, the proportion of overdrafts in total credit decreased, while that of leasing was almost unchanged. (See further details in Tables A4. and A5. in Annex A.)



Distribution of Bank Credit by Type (%)
(Bank Credit by Type in Million US$)


Source: PMA.
Note: The totals may not be exactly equal to the sum of percentages due to rounding.


Q1/2011 saw an increase of 1% in total bank deposits. Deposits stem mainly from the private sector (90% of total deposits), particularly from residents (87%). The proportion corresponding to non-residents increased by almost 5% in Q1, following sharp falls Q3 and Q4/2010. The proportion of public sector deposits in total deposits contracted by 1% in Q1/2011.



Distribution of Bank Deposits (in Million US$)


Source: PMA
Note: Data do not include deposits of the PM A and commercial banks.


Current accounts are the main form of deposits for residents and non-residents, as well as for government. (See further details in Table A6. in Annex A.)

The amount of loans relative to deposits gives an idea of the liquidity of the banking system. In a functioning economy, a relative increase in loans versus deposits (within limits) can be perceived as a positive sign, as monies are not saved but
invested or consumed, which in turn stimulates the economy. In oPt, the loan-to-deposit ratio increased from 40% to 43% in Q1/2011 as loans grew much faster than deposits. (See further details in Table A7. in Annex A.)
Total Bank Loans Total Bank Deposits
and Loan-to-Deposit Ratio


Source: PMA

Survey of the Perceptions of the Owners / Managers of Active Industrial Enterprises Regarding the Economic Situation

Information provided by owners/managers of active industrial enterprises shows a greater demand for bank loans in Gaza than in the West Bank. In particular, whereas only 6% of owners/managers of active industrial enterprises report requesting a bank loan at least once in Q1/2011, 16% of those in Gaza have requested a loan at least once.

Number of Loan Requests from Banks According to Owners/Managers of Active Industrial Enterprises during Q1/2011

West Bank


Source: PCBS.
Gaza Strip


Source: PCBS.

V. PRIVATE SECTOR
The number of new companies registered in the West Bank in April increased by seven compared to March 2011, reaching 122. In Gaza, on the other hand, only 25 new companies were registered in April, that is, ten less than in March 2011 and well below the pre-intifada level of 94 new registrations in August 2000. (See further details in Table A8. in Annex A).


Number of New Company Registrations

Source: Ministry of National Economy.




The area licensed for new construction can be used as a proxy for economic vitality. April 2011 data show an increase of 24% in the area licensed for new construction in the West Bank compared to the previous month. This level is 6% above the pre-intifada (August 2000) level. In the Gaza Strip there was a 5% increase in the area licensed for new construction in March 2011, but this level is still only 6% of the pre-intifada area. (Note: Data for Gaza for April 2011 are not yet available.) (See further details in Table A9. in Annex A.)

Area Licensed for New Construction


Source: Engineering Offices and Consulting Firms.





Forty-four companies from five economic sectors (banking and financial services, insurance, investments, industry, and services) are now listed in the Palestinian Stock Exchange. At the end of April 2011 market capitalization of about US$ 2.8billion. Data for the month of April show increases of approximately 36% in the number of stocks traded and 38% in the value of shares traded. Of the 39 companies traded in the month, 22 were gainers and 14 were decliners. The Al-Quds index decrease by 0.29% in April 2011.

Securities Trade

Source: Palestine Securities Exchange.

VI. TRADE
Export accelerated in March 2011, with exports of goods reaching US$68.3 million –a 21% increase from the previous month. Palestinian exports of goods to Israel increased by 21% in March, following a 16% contraction in February 2011. Exports to other countries increased by 22% in March, following a 14% contraction in the previous month. Palestinian exports are highly dependent on the Israeli market, where 93% of goods exports were destined in March.

Goods Exports from oPt
March 2011


Source: PCBS.


In the case of imports of goods, they increased by 29% in March 2011, reaching US$497.4 million. Imports from Israel increased by 35% in the month, whereas imports from other countries increased by 15%. Still, imports from Israel represented 73% of total goods imports in March.

A trade balance of US$429.1 million was registered in March 2011, representing a 30% increase from the previous month.

VII. GAZA STRIP
There was a significant decrease in the amount of cooking gas imported in Gaza in April 2011, with 2,303 tons allowed in through Kerem Shalom (Karm Abu Salem). This represents a 36% decrease compared to the volume imported in March 2011. During the reporting period, 19,999 liters of petrol and 222,029 liters of diesel were imported for UNRWA, and 45,000 liters of petrol and 75,500 liters diesel for the private sector.


Volume of Registered Fuel Sales in the Gaza Strip


Source: General Petroleum Corporation.
Note: On 1 January 2010, Israel declared Nahal Oz fuel pipelines closed, with fuel being transferred to Gaza only via Kerem Shalom.

Gaza Imports


Source: UNSCO.


April 2011 data reveal a decrease of almost 39% in the total number of truckloads imported into the Gaza Strip compared to March 2011 (See further details in Table A10. in Annex A.) Karni crossing has remained closed since 12 June 2007 for the movement of goods in and out of Gaza, and on 1 March 2011 Israel closed the conveyor belt at Karni, too. On the other hand, Sufa crossing was reopened on 9 March 2011 and was open for 2 days during April 2011. A total of 86 truckloads of gravel (6,091.84 tons) for UNRWA, the Coastal Municipalities Water Utility and ANERA entered Gaza via Sufa (Note: the trucks at Sufa carry up to 70 tons each).

Of the 2,519 truckloads entering Gaza through Karem Shalom during the month, 2,215.5 (88%) were for the private sector and the remaining 303.5 (12%) were designated for humanitarian aid agencies. Food items made up 49% of imported goods (1,239 truckloads), while the remaining 51% of imports (1,280 truckloads) were non-food items.

Following the June 2010 decision to ease the closure of Gaza, monthly import levels have averaged 4,135 truckloads.



Gaza Imports


Source: UNSCO.
Note: The figures exclude gravel imported through Karni in February-May 2007. They also exclude imports through Rafah and Erez.


On 8 December 2010 Israel announced its intention to gradually expand the number and range of exports permitted from Gaza. According to this announcement, allowed exports will include agricultural produce, furniture and textiles.

Gaza Exports


Source: UNSCO.


In April 2011 Gaza was able to export flowers to Europe. In total, 6 trucks of carnations (475,000 stems) were exported via the Kerem Shalom crossing. This represents a decrease of almost 68% in the total number of truckloads exported from the Gaza Strip compared to March 2011.


ANNEX A: Statistical Reference Tables


Table A1.
Consumer Price Index (2004=100) by Major Expenditure Group


Source: PCBS.




ANNEX B: Terms and definitions

Adjusted unemployment rate The adjusted unemployment rate presents the number of unemployed according to the relaxed definition as a percentage of the labor force. The relaxed definition of unemployment includes all persons aged 15 or over who are unemployed plus those who, during the reference period, are without work, are available for work but did not seek work (and therefore could not be classified as unemployed) because they felt that no work would be available to them.The adjusted unemployment rate gives a broader measure of the unutilized supply of labor. The relaxation of the standard definition of unemployment makes sense in circumstances where the conventional means of seeking work are of limited relevance, where the labor market is largely unorganized, where labor absorption is inadequate or where the labor force is largely self-employed.

Al-Quds index: This is the primary stock index of the Palestine Securities Exchange (PSE).

Area licensed for new construction: This is the area licensed for construction in new and existing buildings.

Average daily net wage: This average is calculated as the total net wages paid to all employees divided by total workdays. Wages received in different currencies are converted into New Israeli Shekels according to the exchange rate in the survey month.

Bank credit: It measures the borrowing capacity provided to individuals, firms and organizations by the banking system in the form of loans or other types of credit. Credit is generally believed to contribute to economic growth.

Bank deposits: Deposits are accounts maintained by a bank on behalf of customers. This indicator is often used to measure the safety of and people’s trust in the banking system.

Consumer Price Index (CPI): The CPI is a statistical tool used to measure changes over time in the prices paid by households for a basket of goods and services that they customarily purchase for consumption. The CPI is used to measure inflation over time.

The main categories of goods and services included in the basket of goods are: fruits, vegetables and other food items, beverages, tobacco, textiles, clothing, footwear, furniture, household appliances, household utensils, fuel, power, transportation, communications, medical and pharmaceutical products, goods for personal care, services charges for public transport, communication, hospital care, and others, and school fees. Data on prices for consumers are collected through visits conducted by trained staff to selected markets including groceries, supermarkets, markets, restaurants, general services offices, hospitals, private schools, etc.

Effective/partial closure days: Effective closure days are calculated by adding all days when a crossing is fully or partially closed, excluding weekends and holidays. Partial closure means that the crossing is closed for more than one hour but not for a full day, in which case it would be considered fully closed.Weekends and holidays include all Saturdays, half the Fridays (since labor and commercial flows are about half their normal workday level on Fridays) and universally celebrated Jewish and Muslim holidays. Jewish and Muslim holidays which fall on Saturday or Friday are not counted as a holiday but as a Saturday (full day closure) or Friday (half day closure), respectively.

Employed: The “employed” comprise all persons are 15 years or over who were working at a paid job or business for at least one hour during the week prior to the survey, or who did not work but held a job or business for at least one hour during the week prior to the survey, or who did not work but held a job or owned business from which they were temporarily absent (because of illness, vacation, temporarily stoppage, or any other reason) during the reference week.

Exchange rate: The price of one currency stated in terms of another currency is the exchange rate.

Exports: Exports are any good or commodity, shipped or otherwise transported out of the territory to another part of the world, typically for use in trade or sale. Export products or services are provided to foreign consumers by domestic producers.

Gross Domestic Product (GDP): GDP is the total value of all goods and services produced within oPt in a given period of time. When GDP is expressed in constant terms (real GDP), a deflator is used to adjust for changes in money-value. Quarterly data are annualized by multiplying by 4.

GDP per capita: This is the result of the division of GDP by total population. GDP per capita = GDP/Population

GDP rate of change: The rate of change is the percentage change (increase or decrease) of GDP from the previous measurement cycle.
GDP in period (t) — GDP in period (t — 1)/GDP rate of change in period (t) X 100%

Inflation rate: The inflation rate is the percentage change in the price index over time.
Inflation rate in period (t) = Price index in period (t — 1) — Price Index in period (t — 1)/ Price Index in period (t) = 100%

Government total net revenue: It measures the net inflows received by the government, including clearance revenue, tax refunds, and tax and non-tax revenue collected by the Ministry of Finance and other ministries for the consolidated Single Treasury Account (STA).

Government wage expenditure: This is the government's outlay on the wages and salaries of permanent civilian and security employees.

Government non-wage expenditure: This is the part of government expenditure absorbed by operational expenditures, transfers and minor development and capital expenditures.

Government net lending: This term includes transfers to local government to cover clearance revenue, deductions by the Government of Israel for water and electricity, and services by the Ministry of Health and the Ministry of Agriculture.

Government balance: The government balance is the difference between the government’s total net revenue and its expenditures, including wage and non-wage expenditures, net lending and development expenditures.

External budget support It consists of transfers of resources by donor countries to the Palestinian National Authority to help finance its budget.

Imports Imports are the goods and services that are produced by the foreign sector and are purchased by the domestic economy.

Industrial Production Index (IPI) This index is a statistical tool used for measuring changes in the volume of industrial production during a certain period of time. The index uses the change in volume of production for the largest establishment in each industry. The relative share for the main industrial activities represents the percent share of value added of the industrial institutions in 2009 in addition to the value added of olive presses.

Labor force: The labor force consists of all persons of working age (15 years or over) who are either employed or unemployed during a specified reference period.
labor force = employed + unemployed
Excluded from the labor force are those of working age who are neither working nor searching for work. These could be students, retired persons, those in prison, and homemakers.

Loan-to-deposit ratio: This ratio gives the amount of banks’ loans divided by the amount of their deposits. The statistic is often used to assess the banking system’s liquidity. If the ratio is too high it may imply that banks could not have enough liquidity to cover any unforeseen fund requirements. Conversely, if the ratio is too low banks may not be lending and earning as much as they could be. loan — to — deposit ratio = bank loan/bank deposits X 100%

Number of new company registrations: This is the number of new companies that register with the Ministry of National Economy to conduct business operations in oPt.

Number of shares traded: It is the amount of shares that trade hands from sellers to buyers in the market over a given period.

Underemployment: Underemployment exists when a person’s employment is inadequate in relation to specified norms or alternative employment. Time-related underemployment applies to those who involuntarily work less than the normal duration of work determined for the activity and who seek or are available for additional work during the reference week.

Unemployment rate: The "unemployed" comprise all persons aged 15 or over who, during the week before the survey, were without work, available for work and seeking work. The unemployment rate expresses the number of unemployed as a percentage of the total labor force. The indicator is widely used as a measure of unutilized labor supply.
unemployment rate = unemployed/labor force X 100%

Value of shares traded: The value of shares traded is the sum of the shares traded multiplied by their respective matching price.


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