PMA Issues Economic Developments Report for 1st Quarter of 2014
The Palestine Monetary Authority has issued the economic developments report for the first quarter of 2014, which reviews recent economic developments globally, regionally and locally. The report indicates that the Palestinian economy witnessed a %7.1 growth during 2014 first quarter compared with the corresponding quarter of the year 2013. However, this development came in two contrasting paths; the West Bank has marked an annual growth rate of %9.9, whereas growth in Gaza Strip decreased by %1.0. Growth achieved in the West Bank was the result of increased government spending (%11.4) and investment (%15.3) between these two quarters, while economic recession in Gaza was brought by a strict blockade and economic restrictions. It should be mentioned that economic conditions in West Bank and Gaza Strip are still critical, therefore, growth achieved in the first quarter does not reflect the general trend of growth expected as a whole.
Growth in the West Bank was evident in the unemployment rate, which went down from %20.3 in 2013 first quarter to %18.2 in 2014 first quarter. On the other hand, economic recession of Gaza boosted the unemployment rate from %31.0 to %40.8 during the same comparison period. The remarkable increase of unemployment in Gaza left bad impact to unemployment rate in Palestine (from %23.9 in 2013 to %26.2 in 2014). Inflation increased at %2.2 on an annual basis (%3.0 in the West Bank, %1.4 in Gaza Strip), and rising prices of tobacco and dwelling services were evident to inflation.
When talking about public finance, the total balance deficit declined before grants and donations during 2014 first quarter against the corresponding quarter of 2013 (about %66.7), due to the growth of total local net revenues at %52.0, against the rise of general expenditure at %2.1. Although the foreign assistance value has decreased during the 2014 first quarter, the total balance achieved a surplus for the consecutive third quarter. In contrast, though, recessed volume of foreign assistance has increased the current account deficit in balance of payment at about 1.8 times compared to the corresponding quarter. Then again, levels of government debt remained relatively steady during that quarter (about %16.7 of Gross Domestic Product) due to stability of both domestic and foreign debt value.
In another context, performance of the Palestinian banking sector remarkably improved during the first quarter of 2014, which was evident through an annual growth of assets/liabilities of banks at about %10.4, while improved quality and growth of credit portfolio was at %14.7, and customer deposits increased by approximately %9.6 and the bank ownership rights increased by %8.8. Direct credit facilities still achieve growth rates higher than those achieved by GDP, to denote the supported role played by banking sector to economy (financial depth ratio). In a related context, results of stress testing conducted by PMA for quarter financial statements of all banks operating in Palestine –as of end of 2014 first quarter- showed strength of Palestinian banking sector in general.