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Source: United Nations Special Coordinator for the Middle East Peace Process (UNSCO)
31 October 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 exchange rate between the US$ and the NIS dropped even further in October. The declining dollar will benefit the Palestinian economy as imports will become cheaper.

Registered fuel sales in the Gaza Strip saw some improvement in October. Fuel usage can be an indicator of economic activity. Gasoline sales increased by 13 percent in October.

In October 2007, the Palestinian Consumer Price Index (CPI) continued to increase (0.76 percent) albeit at a much slower rate than in the previous two months. October also marks the first month since July 2007 during which the CPI in the West Bank (excluding Jerusalem) grew faster than in Gaza. Since July, food prices in the Gaza Strip have risen by more than 10 percent even though in October, food prices rose faster in the West Bank than in Gaza.

Truck movement to Gaza has been restricted to humanitarian supplies only since 12 June 2007. Exports were stopped altogether at the same time. The trend of Sufa becoming the dominant goods crossing point was reversed in October 2007 with the number of truckloads imported through Karni increasing by 54 percent (if compared to September 2007). In addition to Karni and Sufa an additional 568 truckloads of humanitarian supplies were imported into the Gaza Strip via the Kerem Shalom crossing point.

The Palestinian negative balance of payment in terms of its trade with Israel declined sharply in the second quarter of 2007. The 11 percent drop in the second quarter of 2007 has resulted in the Palestinian balance of payment deficit for trade with Israel to top half a billion US$ for the quarter. On an annual basis this would mean that Palestinians import over 2 billion more from Israel than they export to Israel.

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. The number of new company registrations in the West Bank increased slightly in October 2007. However, overall, for Gaza and the West Bank combined, the total number of new company registrations in October amounted to only 20 percent if compared with the pre-Intifada level.

Similarly to new company registrations, the area licensed for new construction is used as a proxy indicator for economic vitality. October 2007 data contrasts quite sharply with expectations. While no construction materials are imported, the total area for which new construction licenses were approved for the Gaza Strip increased three-fold. In contrast, in the West Bank, where construction materials are available, total area licensed for new construction dropped by 16 percent. If compared to pre-Intifada levels however, the number of dunums licensed for construction has dropped considerably (West Bank: 63 percent and Gaza: 74 percent.)

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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