Deficit in Current Account is USD 292 Million of the Palestinian Balance of Payments – Fourth Quarter 2020

The Palestinian Central Bureau of Statistics (PCBS) and the Palestine Monetary Authority (PMA) announced the preliminary results of the Palestinian Balance of Payments (BoP) for the fourth quarter of 2020, as part of the joint periodic issuance of the Palestinian balance of payments (BoP), which represents a continuation of the joint efforts undertaken by the two institutions. Noting that the data excludes those parts of Jerusalem, annexed by Israeli occupation in 1967.

Deficit in trade balance of goods (specifically with Israel) is the main reason behind the current account deficit

The preliminary results in the fourth quarter of 2020 indicated an incessant deficit in the current account (goods, services, income, current transfers), which amounted to USD 292 million. The reason behind this deficit is mainly trigger by the deficit in the goods balance, which amounted to USD 1,275 million, in addition to the deficit in the services balance, which amounted to USD 228 million.

Compensations of employees working in Israel is the main reason for the surplus in the income 

Income account (compensations of employees, and investment income) recorded a surplus of USD 741 million during the fourth quarter of 2020. Compensations of workers in Israel, which amounting to USD 705 million (an increase of 8 percent from the previous quarter) was the main reason for this surplus. As for the received investment income, it reached USD 58 million, mainly due to the income received on the portfolio investments abroad, in addition to the interest received on Palestinian deposits in banks abroad.

Current transfers to other non-governmental sectors are the main reason for the current transfers’ surplus

Current transfers recorded a surplus of USD 470 million, an increase of 4 percent over the previous quarter. Total current transfers from abroad amounted to USD 556 million, of which 17 percent to the government sector, while the current transfers to other sectors accounted for 83 percent. It is worth noting that donors’ transfers accounted for about 15 percent of the total current transfers from abroad.

The preliminary results also indicated a surplus in the capital and financial account of USD 383 million, as a result of the surplus in the financial account of USD 266 million. On the other hand, the reserve assets of the PMA recorded an increase of USD 71 million during the quarter, compared to a decrease of USD 74 million in the previous quarter.

It is worth mentioning that the Balance of Payments (BoP) is a tool used to determine the country’s economic position in relation to other countries worldwide, and the size of its external debt. This tool enables researchers and decision-makers in devising the appropriate policies and developmental plans to improve their external balance, and to insure stability and sustainable economic growth. Noting that the balance of payments was prepared according to the latest international recommendations, taking into account the specificity of the Palestinian situation.