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





SOCIO-ECONOMIC REPORT - FEBRUARY 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 six 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. 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 socio-economic 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.


I. SOCIO-ECONOMIC FACT SHEET - FEBRUARY 2011

Sources: PCBS: production, prices, labor market; MoF: public sector; PMA: banking sector; MoNE: new company registrations; Engineering Of f ices and Consulting Firms: area licensed for new construction; MoNE and General Petroleum Corporation: Gaza truck movement; UNSCO: closure and Gaza truck movement.
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 f lows.

II. MACRO-ECONOMIC SITUATION

II.a Production
Real GDP grew by 2.8% in Q4/2010, bringing the annual growth rate to 9.3%. The recent economic growth was experienced only in the West Bank, however, 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 an almost 2-year period of expansion. Still, at 15.1% the overall annual growth rate in Gaza was much higher than in the West Bank, where real GDP grew by 7.6% in 2010 compared to 2009.

Real GDP Rate of Change
Distribution of Real GDP
Q4/2010

Source: PCBS, Preliminary Estimates of Quarterly National Accounts (Q4/2010).
Note: Base year is 2004.

Source: PCBS, Preliminary Estimates of Quarterly National Accounts (Q4/2010).
Note: Base year is 2004.

The disparities between the West Bank and the Gaza Strip become strikingly clear when the size of the population is taken into account. Although real GDP per capita has increased in both regions in the last years, in Gaza it remains less than half the real GDP per capita in the West Bank.


Real GDP per capita
Q4/2010
Contribution to GDP (select economic activities)
Source: PCBS, Preliminary Estimates of Quarterly National Accounts (Q4/2010).
Note: Base year is 2004.
Source: PCBS, Preliminary Estimates of Quarterly National Accounts (Q4/2010).
The relative size of services has shrunk in the last ten years but it continues to be the most important sector in the economy, contributing 21% to GDP in 2010. This sector is followed by public administration and defense (14%), and wholesale and retail trade (11%).

In spite of its decreasing relative size over time, agriculture and fishing was the most dynamic sector in Q4/2010, expanding its gross value added by 36%. Construction saw the biggest decline in Q4/2010, 6%.

II.b Prices
The Consumer Price Index (CPI), used to measure inflation, reflects an increase of 0.4% in prices in February 2011 compared to the previous month, but an inflation rate of 3.6% in the year since February 2010. Year-on-year inflation was highest in East Jerusalem (4.9%), followed by the West Bank (3.9%). The greatest price rises were felt in the following sectors: food and soft drinks, restaurants, cafes and hotels. The biggest drops were in miscellaneous goods and services and medical care.



Source: PCBS.

The CPI increased marginally in the West Bank, led by an increase in the price of furniture and household goods and of restaurants and cafes. The cost of housing presented the biggest decrease in this region.

In East Jerusalem the CPI also rose slightly, pushed primarily by a rise in the cost of furniture and household goods, followed by restaurants and cafes. The price of miscellaneous goods and services saw the biggest decline, followed by the cost of medical care.


Change in Consumer Price Index by Major Expenditure Groups
February 2011

Source: PCBS.

In the Gaza Strip the CPI increased by 0.8% during the month of February, pushed by a rise of 2.5% in the price of food and soft drinks. The most significant decline in prices in Gaza during the month was in textiles, clothing and footwear, followed by furniture and household goods.

II.c Exchange rates
Both the NIS and the JOD fell against the euro in February 2011. The NIS also fell against the US dollar, while the JOD’s exchange rate to the US dollar is constant at 0.71.

Average Monthly Exchange Rates

Source: Bank of Israel and Central Bank of Jordan.
II.d Labor Market
Labor force participation increased in absolute and relative terms in both the West Bank and the Gaza Strip in Q4/2010.

Labor Force Participation Rate (%)
(Labor force in thousands)



A total of 69% of workers are wage employees, and only 6% are employers. The self-employed and unpaid family member categories absorb 18% and 8% of workers, respectively. These categories are less likely to offer formal work arrangements, access to benefits, to protection programs or to other safety nets, and they are more likely to be affected by an economic downturn. They are therefore used to approximate “vulnerable employment”. Using this proxy, the data show that 1 in 4 workers in oPt are in a precarious work situation.

Employment by Status in Employment (%)


Source: PCBS, Labor Force Surveys.
Note: The totals may not be exactly equal to the sum of percentages due to rounding.


Average daily net wages continue to be considerably higher for women than for men in Gaza, but the opposite is observed in the West Bank. Still, women’s wages in Gaza are about 80% their average in the West Bank. In the case of men, their wages in Gaza are 65% the West Bank average, and this disparity between the two regions is growing over time.



Unemployment in oPt remains high at 23.4%. Q4/2010, however, saw a decrease in the unemployment rate, most notably in the West Bank. In both the West Bank and the Gaza Strip, the level of unemployment remains more than 2.5 times higher than it was in Q2/2000. (See Table A2. in Annex A for further details.)

Regional differences are marked, with the rate in Gaza (37.4%) about double the rate in the West Bank (16.9%). The highest unemployment rates in the West Bank are observed in Bethlehem (22.4%) and Hebron (22.3%). In the case of Gaza, the highest rates are found in Khan Yunis (50.6%) and Rafah (40.7%).

In fact, all governorates in the Gaza Strip have employment rates below 65%. Employment in the governorates in the north and south of the West Bank is between 65% and 80% of the labor force. Only those governorates in the central area of the West Bank employ more than 80% of their labor force.

The distribution of employment by sector also reveals interesting intra-governorate differences. In particular, it is observed that the private sector is a more important employer than the public sector in the West Bank, but a different situation is observed in the Gaza Strip. In Deir Al-Balah governorate, for example, 63% of workers are employed in the public sector, followed by Rafah with 59%.


Labor Force and Unemployment Rate
Q4/2010

Source: PCBS, Labor Force Survey.
Note: The boundaries and the names shown and the designations used on the map do not imply official endorsement or acceptance by the UN.

Migration patterns in oPt
The upward trend in emigration from oPt was reversed in 2009, when a total of 7,122 persons left oPt to settle elsewhere (excluding whole families who have emigrated). About 40% of these emigrants are women, and 33% are aged between 15 and 29 years of age. The emigrants have, in general, a good level of formal education: 36% hold a bachelor’s degree or higher, and 36% have secondary education. Common destinations for these Palestinians are Jordan, the United States and the countries in the Gulf. Studies was the reason to emigrate for 34% of them, whereas the improvement of living conditions motivated around 15%, and the lack of job opportunities in oPt was the reason in about 14% of the cases.

Thirteen percent of Palestinians in oPt aged 15 to 59 years express the desire to emigrate. Of these, 39% wish to do so to improve living conditions and 15% due to lack of job opportunities. In the Gaza Strip, 14% of those wishing to emigrate are motivated by the lack of security.


Number of Palestinian Emigrants and Returnees


Source: PCBS, Migration Survey in the Palestinian Territory, 2010.


The number of Palestinian returnees has been rising rapidly since 2007, reaching a total of 6,426 in 2009. Thirty-six percent of them are in the 15-to-29-year age group, and most of them come from Jordan and the Gulf countries.

III. PUBLIC SECTOR

Government revenue fell by 16% in Q4/2010, after 3 periods of expansion. Government expenditures, both wage and non-wage, increased in Q4/2010, while net lending decreased. The government deficit in this last quarter of 2010 widened by almost 70%, reaching over US$440 million. This was matched by external budgetary support, which was 2.5 times higher in Q4 than in Q3/2010, but was still lower than one year earlier.


Source: Ministry of Finance.

IV. BANKING SECTOR

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, most of which is destined to businesses, followed by consumers. The distribution of credit by borrowing entity has not shown major changes in the last quarters.
Total Value of Bank Credit and Distribution by Borrowing Entity

Source: PMA.

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. Total Bankers' acceptances and discounted bills Loans Overdrafts Leasing


Most of bank credit is in the form of loans, and their relative weight as a proportion of total bank credit grew over time until Q2/2010, as that of overdrafts fells. (See further details in Tables A4. and A5. in Annex A.)

Q4/2010 saw an increase of close to 3% 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 declined by almost 30% in Q4, following a sharp fall of 44% in Q3/2010. The proportion of public sector deposits in total deposits doubled to 10% between Q2/2000 and Q4/2010. Similarly, the proportion of government deposits in total public sector deposits has grown notably over time.


Distribution of Bank Deposits (in million US$)

Source: PMA
Note: Data do not include deposits of the PMA 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 decreased in Q4/2010 as deposits grew faster than loans. (See further details in Table A7. in Annex A.)


Total Bank Loans, Total Bank Deposits and Loan-to-Deposit Ratio

Source: PMA.

V. PRIVATE SECTOR

The number of new companies registered in the West Bank in February increased by 13% compared to January 2011. However, when compared to pre-Intifada registrations this number is marginally lower. For Gaza, data identify 37 new registered companies in February 2011, 14% less than in January 2011, and 60% below the pre-intifada level. (See further details in Table A8. in Annex A).

Number of New Company Registrations

Source: Ministry of National Economy.

Area Licensed for New Construction

Source: Engineering Offices and Consulting Firms.


The area licensed for new construction can be used as a proxy for economic vitality. February 2011 data show a sharp rise of 75% in the area licensed for new construction in the West Bank compared to the previous month, a level 15% higher than the one observed in August 2000. In the Gaza Strip, there was an 88% drop in the area licensed for new construction in February 2011. (See further details in Table A9. in Annex A.)

Data on the Palestinian stock exchange are used as a proxy of Palestinian perceptions vis-à-vis the state of the national economy. Data for February 2111 show a decrease of approximately 14% in the number of stocks traded and a small decrease of 1% in the value of shares traded. The Al-Quds index fell by 1% in February.


Securities Trade

Source: Palestine Securities Exchange.

VI. GAZA STRIP

There was a significant a decline in the amount of cooking gas imported in Gaza in February 2011, with 2,280 tons allowed in through Kerem Shalom (Karm Abu Salem). This represents a 25% reduction compared to the volume allowed in January 2011. During the reporting period, 40,000 liters of petrol and 127,810 liters of diesel were imported for UNRWA, and 45,000 liters of petrol and 123,010 liters diesel for the private sector.

Volume of Registered Fuel Sales in the Gaza Strip


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


The level of imports into Gaza did not vary much in February 2011. Data for the month indicate that the total number of truckloads imported into the Gaza Strip increased by 2% compared to January 2011. (See further details in Table A10. in Annex A.)

Gaza Imports

Source: UNSCO.

Karni crossing has remained closed since 12 June 2007 for the movement of goods in and out of Gaza. The single conveyor belt/chute for cereals and animal feed at Karni was open for a total of 11 days during February 2011. One thousand fifty truckloads of animal feed, wheat and gravel for UNRWA, UNDP and the Coastal Municipalities Water Utility entered Gaza via the conveyor belt. Of the 3,045 truckloads entering Gaza through Karem Shalom during the month, 2,521 (83%) were for the private sector and the remaining 524 (17%) were designated for humanitarian aid agencies. Food items made up 43% of imported goods (1,320 truckloads), while 57% of imports (1,725 truckloads) were non-food items.

Following the June 2010 decision to ease the closure of Gaza, monthly import levels have fluctuated between roughly 3,900 and 5,200 truckloads. On average, imports have grown by 6% per month since June 2010, which has not been enough to bring total imports to the level observed before the closure was tightened in 2007. In February 2011 imports were only about 85% of the May 2007 level and only 50% of the August 2000 level.


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 expand the number and range of exports permitted from Gaza. According to this announcement, allowed exports now include agricultural produce, furniture, textiles, and light industrial products.

Gaza Exports

Source: UNSCO

In February 2011 Gaza was able to export strawberries and flowers to Europe. In total, 27 trucks of strawberries (53.2 tons) and 25 trucks of carnations (4,054,000 stems) were exported via the Kerem Shalom crossing. This represents less than half the January 2011 export level.


ANNEX A: Statistical Reference Tables
Table A1.
Consumer Price Index (2004=100) by Major Expenditure Group

Source: PCBS.


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

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

Source: Ministry of National Economy.

Source: Ministry of National Economy.

Source: Engineering Offices and Consulting Firms.

Source: Ministry of National Economy (Aug 2000); General Petroleum Corporation (other periods). Note: Truckload imports exclude industrial diesel supplies to power plant.

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 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 rate of change - The rate of change is the percentage change (increase or decrease) of GDP from the previous measurement cycle.

Inflation rate -The inflation rate is the percentage change in the price index over time.

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.

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. 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.

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.

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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