PMA Issues Economic Forecasts Report 2015

Real Growth Falls to -2.7 Percent in 2014, Relative Improvement by 2.9 Percent Expected in 2015

Ramallah – --/12/2014

The PMA has issued the Economic Forecasts Report 2015, which shows that the Palestinian economy has witnessed further hardships in light of a third consecutive year of continuous slowdown, due to shocks affecting the economy in recent years and their exacerbating impact on economic performance.

The report shows that 2014 saw further deterioration, particularly in the second half of the year, as a consequence of the economic relapse in the aftermath of the recent Israeli attack against Gaza. The assault brought all economic activities and the entire production process to a halt. The deterioration in the security situation in the West Bank and the adverse impact of the Israeli economy on certain West Bank economic activities are also responsible for this relapse.

For the current year, the PMA estimates that the Palestinian economy experienced a contraction in real growth rate by -2.7 percent accompanied by a decline in real per capita income (average real GDP per capita) by around 5.5 percent. It is also expected that private sector and public sector value added growth for 2014 has dropped by 3.5 percent and 2.1 percent, respectively, as compared to the previous year. Estimates also point to a rise in unemployment rates to around 29.0 percent of labor force, compared to 23.4 percent in 2013, in addition to a rise in the inflation rate to 2.0 percent, compared to 1.7 percent in 2013.

As for 2015, PMA forecasts show a relative improvement by which real GDP may record a 2.9 percent growth compared to the previous year, which is expected to reflect positively on real per capita income pushing it up by 0.2 percent for the same comparison period. Additionally, it is also expected that private sector value added will increase by 3.6 percent, whereas public sector value added growth is expected to increase by 2.4 percent as compared to 2014. PMA forecasts also show that total final consumption is expected to grow by around 6.8 percent and total investment by around 15.5 percent. Palestinian exports are expected to rise by around 22.7 percent alongside a rise of 22.4 percent in imports, as compared to 2014.

Additionally, unemployment is expected to fall to around 27 percent of labor force, in light of the expected 2015 growth and the subsequent increase in job opportunities and employment. It is also expected that the general price level in 2015 will be around the levels of past years at 1.8 percent, as compared with 2.0 percent in 2014.   

It is acknowledged that the forecasts are sensitive to the conditions of economic and political stability, particularly that the Palestinian economy operates within a high-risk environment. In this context, the report analyses the potential risks (shocks), both positive and negative, which may well impact the key economic indicators.

The Palestinian economy is expected to grow by 8.1 percent during 2015 in case the political situation improves, the flow of grants remains constant and regular, and the funds to reconstruct Gaza are released. Likewise, unemployment rates are expected to drop to around 23 percent of labor force under the aforementioned assumptions.

In contrast, PMA forecasts point to a retraction in real growth by -3.9 percent, as compared to 2014, if political and security conditions undergo a sharp deterioration. Real GDP per capita is also expected to drop by -6.7 percent. Moreover, it is expected that such a scenario will have adverse effects on unemployment rates, pushing them up to around 31 percent of labor force in 2015.

The publication of this report comes as part of PMA efforts to make economic, financial and banking information, data, research and reports available to researchers and those interested in the Palestinian economy and its various sectors.

Full report available here