PMA Publishes the Economic Developments Report, 2015Q2

The PMA published the Economic Developments Report, 2015Q2, which reviews the latest economic developments at the local, regional and global levels. The report points to a relative rebound in economic growth, with GDP increasing by about 2.1 percent y-o-y, as a result of accelerating growth in the West Bank and the continuous recovery in Gaza Strip. In the West Bank, growth accelerated to around 3.3 percent y-o-y, mainly owing to a recovery in Palestinian government finances following the release of clearance revenues previously held by Israel. Meanwhile, economic activity resumed its gradual recovery in most economic sectors in Gaza Strip. Yet the grave repercussions of last year's Israeli assault on the Strip remain evident in latest data; GDP achieved in 2015Q2 remains 1.5 percent below that realized in the 2014Q2.

This upturn in economic growth was positively reflected in labor market conditions in the West Bank, with unemployment rates falling to 15.4 percent, compared to 16.3 percent in the previous quarter. In contrast, the Gazan market remained relatively unaffected, with unemployment remaining strikingly high at 41.5 percent, compared to 41.6 percent in 2015Q1. As a result, unemployment in Palestine dropped to 24.8 percent, as opposed to 25.6 percent in the previous quarter. 

In tandem, inflation trends in both regions exhibited some consistency during 2015Q2, in contrast to previous quarters. Recovering growth in the West Bank drove prices into positive growth region once again with inflation reaching 2.0 percent, while inflationary pressures in Gaza continued to build up owing to resumed production in most economic sectors, leaving inflation at 4.0 percent. The end result was a rise in the Palestine's Consumer Price Index by 2.8 percent y-o-y.

Government finances witnessed more fluctuations during the quarter after the release of clearance revenues that Israel withheld in response to the Palestinian Authority's move to join the International Criminal Court (ICC). As a result, total public revenues and grants almost doubled compared to their levels in 2015Q1, in parallel with a 14.7 percent increase in foreign aid and grants, and against a 50 percent rise in public expenditures over the same period. In consequence, the overall surplus (after grants) soared to NIS 948.9 million, compared to a deficit in the previous quarter and far lower surplus in 2014Q2.