As part of PMA efforts to foster financial and monetary stability in Palestine, the Research and Monetary Policy Department developed the PMA Business Cycle Indicator (PMABCI) in Palestine, which will be published on a monthly basis to the public. This indicator aims to monitor fluctuations in economic activity, including production, and employment, and their repercussions on the Palestinian economy. Central banks around the world pay close attention to this indicator because of its importance in providing real-time information about the economy, and thus help them in designing the appropriate monetary policy without having to wait for the release of actual data that need time for publication.

Dr. Jihad Khalil Al-Wazir, PMA Governor, said that the importance of this indicator lies in its effectiveness as a tool for monitoring economic performance and as an input in short-term forecasts of GDP. Thus,the indicator enables policy makers and businessmen alike to assess economic performance at the sectoral and geographical levels and to predict future trends of the economy. The PMA is also seekingto utilize the current PMABCI as one of the main variables in forecasting key economic indicators in the Palestinian economy, as the data become available.

Mr. Mohammad Atallah, Research and Monetary Policy Department Director, explained that the value of this indicator ranges from minus 100 to positive 100;a positive value indicates favorable economic performance, and the bigger this value the better theeconomy. But if the value is negative, then 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 unlikely to do so in the near future.

Results show that PMABCI reached -1.42 in Palestine (-6.06 in West Bank and 2.84 in Gaza Strip) in March 2013, which means that the business sector is not doing well. But when it is compared with the first observation (November 2012), which reached -14.06 in Palestine (-22.54 in West Bank and 9.14 in Gaza Strip), we see that the situation is gradually improving. As to the geographic distribution, the economic situation is getting better in West Bank, but is deteriorating in Gaza Strip since November 2012.

In order to calculate and publish the PMABCI, the PMA signed a memorandum of understanding with the Palestinian Federation of Industries (PFI), in which the PFI will conduct the business survey on behalf of PMA on a monthly basis starting from November 2012, based on stratified random sampling, taking into consideration: firm size, industry, and the geographical distribution (West Bank and Gaza Strip).