The extended PMA Business Cycle Index (extended PMABCI) – March 2019

Improvement in the West Bank and Gaza Strip

The PMA has released the results of its extended Business Cycle Index (extended PMABCI) for March 2019. The results revealed an improvement in the overall level for the second month in a row despite unfavorable political conditions during the same period, including only a partial disbursement of the public employees’ salaries.According to the surveyed firm owners, the performance of their firms in terms of production, sales and inventory was going at an either steady or accelerating pace during the previous three months. However, they witnessed a decline during the last days of March following the President Mahmoud Abbas’s announcement regarding the payment possibility of only 40% of the public servants’ salaries. Accordingly, the overall index managed to increase to around 2.9 points this March compared to -1.1 points in the previous month, and higher than its corresponding level of the last year (-0.6 points).

In the WB, the index grew to 16.7 points compared to 12.6 points in February. This improvement is mainly supported by a pickup in the industry index (from 4.0 to 6.6 points). The industry has enjoyed relatively high production and sales since the beginning of this year, according to the industrial firms’ owners. In regards to key sectors, the construction index rose from 0.5 to 1.1 points, while the trade index maintained the previous level at 2.5 points. This was followed by moderate increase in the agriculture index (from 4.5 to 5.4 points). Meanwhile, other sectors’ indices (renewable energy and IT and communications) have marginally grown, while the storage and transport index has slightly declined.

In general, the surveyed firm owners indicated an improvement in production during the previous period, along with relatively higher sales. However, they expressed their concerns about future production in the coming three months given current political conditions and their consequent budget crisis.

Meanwhile, deterioration in the Gazan index eased in March, approaching its level at the beginning of the year at -29.8 points, compared to February’s index of -33.3 points. This resulted from smaller falls among most sectors’ indices, particularly in trade and industry. The former index improved from -21.1 to -19.5 points, while the later increased from -5.6 to -4.5 points, as both sectors experienced lesser declines in production, according to firm owners.

At the same time, the indices of the remaining sectors witnessed slighter movements: agriculture (from -2.9 to -2.5 points); storage and transport (from -1.4 to -1.2 points); IT and telecommunications (from -0.3 to -0.2 points); construction (from -2.0 to -1.9 points); and renewable energy, which index stabilized at 0.0 points.

It is worth noting that the Gazan index has always registered negative values since the PMA started calculating the extended indices (since two years), which reflect the adverse long-lasting political and economic conditions in the Strip. During this month, and despite lower declines in production and sales, firms expressed high level of pessimism about the near future.

It is noteworthy that the extended PMABCI is a monthly index, which aims at capturing the state and evolution of economic activity in Palestine by tracking sectoral performance (especially fluctuations in production and employment levels). The maximum value of the index is positive 100 points, while the minimum is minus 100 points; a positive value indicates favorable economic performance, while a negative value indicates bad performance. On the other hand, a value close to zero indicates that economic performance did not change and is unlikely to do so in the near future.