PMA Announces the Results of December PMABCI: A Remarkable Contraction
The PMA has released the results of PMA Business Cycle indicator (PMABCI) for December 2013. The PMABCI is a monthly index which aims to capture the state and evolution of the Palestinian business environment, reflecting fluctuations in production and economic activity over time. The construction of the indicator is based on qualitative data obtained from monthly business surveys of a representative sample of industrial institutions’ owners/mangers on the value of various leading indicators during a specified period, and their expectations for the coming months. After that, the data is processed to construct a quantitative PMABCI.
During December 2013, the PMABCI witnessed a notable contraction, decreasing from 1.44 in November to -8.31. This contraction comes as a result of the remarkable decrease in the West Bank (WB) indicator, and tiny increase in Gaza Strip (GS) indicator, over the same period.
The WB indicator diminished from 1.56 in November to around -12.87 in December, which comes basically from the contraction in textile sector (from 0.63 to -8.18) that forms around one quarter of the total labor force in the WB. Also, construction and furniture industries have decreased from -0.39 to 2.66 and from 0.0 to -1.63, respectively, over the same period, and engineering and, chemical and pharmaceutical industry have also declined. On the other hand, the other sectors witnessed minute improvements. However, data also indicates that the industrial firms are pessimistic about the near future, due to the unclear prospects of the WB economy under uncertainty of progress in the Palestinian-Israeli ongoing negotiations, and the possibility of deterioration in the security conditions.
In GS, the indicator witnessed a tiny increase during December (from -5.54 to -4.41), but it continued to reflect a continuous contraction in industrial activities, though at a lesser pace than in the previous month. This contraction is basically due to the decline in the food sector which forms around 15 percent of GS labor force, along with other declines in the paper and plastic industries. On the other hand, the non-metallic industries and, chemical and pharmaceutical industries have relatively improved.
It is worth mentioning that GS has recently suffered from overwhelming electricity crisis, where Gaza power plant has stopped working due to the lack of fuel required for its operation. Many reasons stand behind this shortage, but it stems mainly from cutting imported fuel from Egypt under the continued political unrest in Egypt. This electricity crisis has critically influenced all life aspects in GS, especially the social and economic aspects. Beside this, GS still suffers from the Israeli siege and political schism. On the other side, data indicates that the probability of future deterioration in economic and security conditions has significantly harmed the indicator in December.
It is important to notice that the maximum value of this indicator is positive 100, while the minimum is minus 100; a positive value indicates favorable economic performance and the bigger this value, the better the economy. But if the value is negative, economic performance is worsening the closer it gets to minus 100. 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.
Source: PMA (2013). PMABCI, December, 2013.