The PMA Business Cycle Index (PMABCI) – May 2020
Moderate improvement in the West Bank and Gaza
The results of PMA Business Cycle Index (PMABCI) revealed that the overall index maintained very low levels during May; however, it moderately improved from the previous month, scoring about -51.8 points compared to -71.9 points in last April. Since the beginning of this year, the index is experiencing a pace of decline.
Nonetheless, this drop has remarkably speeded since March following the government declaration of emergency state to fight coronavirus (Covid-19) outbreak. This month modest increase is resulted from similar rises in both the West Bank and Gaza Strip; nevertheless, it remained remarkably lower than the levels achieved in the corresponding month and the previous years in average.
In West Bank, the vast majority of firms resumed its operations during May but could not achieve pre-lockdown capacity levels yet. Accordingly, the index has picked up from -78.2 points to around -58.3 points this month due to rises in all surveyed sectors. The trade sector has witnessed the biggest increase as its index grew from -42.1 points to -30.0 points, followed by the manufacturing index that rose from -23.5 points to -17.5 points. The remaining indices have improved as well: IT and telecommunication (from -1.4 to -0.8 points), the construction (from -2.3 to -2.1 points), and the agriculture (from -6.3 to -5.9 points). Moreover, the indices of renewable energy, and transport and storage have slightly risen, scoring -0.1 points and -2.4 points, respectively.
According to the surveyed firm owners, the production and sales in the West Bank during May have settled at very low levels. Nonetheless, their near future expectations have recovered, expecting somehow higher production and employment levels in the three coming months.
At the same time, the economic activity in Gaza Strip, despite not experiencing lockdown, has been affected by the regional and global developments. During May, Gazan index has moved in line with the West Bank’s index, improving from -56.9 points to -36.6 points as a result of most sectors increases. The most notable growth have been seen in the trade sector, pushing its index up to -20.6 points compared to -37.7 points in last April. This followed by rises in the agriculture index (from -6.4 to -4.9 points), the manufacturing index (from -7.1 to -5.8 points), and the construction index (from -3.0 to -2.5 points). Meanwhile, the indices of transport and storage, IT and telecommunications, and renewable energy have all relatively stabilized at -1.9 points, -0.6 points and -0.2 points, respectively.
The consequences of the world lockdown pose new challenges to Gazan economy, which has been suffering from the blockade and the deteriorating economic conditions for years. Owners of Gazan surveyed firms indicated weak level of domestic production and sales, despite its modest improvement during May. Nonetheless, they expressed their expectations of better levels in the three coming months.
It is noteworthy that the extended PMABCI is a monthly index, which aims at capturing the state and evolution of economic activity in Palestine by tracking sectoral performance (especially fluctuations in production, sales, and employment levels). The overall index is simply the sum of all sectoral indices. Its maximum is positive 100 points, while the minimum is minus 100 points; a positive value indicates favorable economic performance, while a negative value indicates bad performance. On the other hand, a value close to zero indicates that economic performance did not change and is unlikely to do so in the near future.