PMA Issues the Economic Developments Report for the First Quarter of 2013

The PMA issued the Economic Developments Report for the first quarter of 2013, covering the latest global and domestic economic developments. The report highlights a condition of general economic slowdown in developed countries, especially the United States and the Euro periphery countries. This was accompanied by a similar slowdown in Emerging and Developing Countries (EDCs), where consecutive global crises have been translated into reduced demand for (EDCs) exports. As a result of this modest performance, price and employment levels -in most developed countries- witnessed a noticeable decline, while global oil and food price levels increased compared with the same period of the previous year.

In addressing the domestic economy, the report points to a further slowdown in growth during the first quarter of 2013, as the year-on-year growth rate did not exceed 2.7%, in comparison to 5.3% achieved during the fourth quarter of 2012. These percentages reflect uneven and fluctuating performances among the West Bank and Gaza Strip; while Gaza had an y-o-y growth rate of more than 12%, the West Bank suffered an economic decline of 0.6%. Moreover, these developments were translated in rising unemployment, which returned to its levels in the corresponding quarter of 2012 (at 23.9%): with 20.3% in the West Bank, and 31.0% in Gaza. This coincided with a significant growth in the number of workers employed in Israel and the settlements, to exceed 93,000 workers, and an increase in the nominal daily wage by about 5.6% from the corresponding quarter. Additionally, price levels witnessed an y-o-y increase of 1.7%, directly resulting from an increase in the prices of tobacco and alcoholic beverages. Naturally, this led to a decline in citizens’ purchasing power, particularly in the West Bank as it experienced the biggest rise in prices compared to a relative stability in price levels in Gaza Strip.

With regard to public finance, both total revenues and current expenditures grew by about 9.0% and 12.0%, respectively. On the revenue side, this growth was amassed in local revenue collection and foreign aid, which grew by 142% to reach USD 511 million, all as both wages and non-wage expenditures increased significantly during the same period. Accordingly, the current deficit rose to NIS 607 million, compared with 490 million in the corresponding quarter. It is worth mentioning that despite the increase in foreign aid provided to the Palestinian government, allowing it to partially cover debts owed to the banking system; however, the internal debt balance continues to be higher than its level in the corresponding quarter, compared to a stable external debt balance. As a result, public debt rose by about 1.5% during the comparative period, to reach USD 2,260.8 million (or about 21.5% of nominal GDP).

Even with this economic slowdown, the external sector made some positive developments during the first quarter of 2013. Trade deficit in the balance of payments witnessed a significant decline, coupled with a clear rise in income from abroad and current transfers, causing the current account deficit to decline by about 65.2% compared with the corresponding quarter.

Additionally, the banking sector’s performance witnessed a significant improvement during the comparative period. The assets / liabilities of banks operating in Palestine grew by about 10.5% compared with the corresponding quarter of 2012, to reach 10,111.8 million dollars. Direct credit facilities also increased by about 11.2%, coupled with a 9.5 % climb in non-bank (customer) deposits and a 5.3% rise in Banks’ equity