OPT socio-economic report (July 2008) – UNSCO

The report is divided into three sections:

Section 1 consists of a one-page fact sheet which provides a snapshot view of the socioeconomic situation of the current and previous reporting period and for reference purposes provides base line figures for the period just prior to the outbreak of the second Intifada.

Section 2 and 3 report on the Macro-economic and the Private sector and banking modules of the UNSCO database. They provide data on the last six reporting periods for each indicator as well as base line data. In addition, some initial analysis on observed trends is given below each table.

¹ For a more detailed report on sections C (Macro-economy) and D (Private sector), see data below.

² CPI Base year 2004 = 100

³ MoNE data does not include aggregates or aid flows.

⁴ Adjusted unemployment is calculated by adding discouraged workers (i.e. unemployed but no longer seeking work) to the ILO standard.

⁵ Effective closure days are calculated by adding all days when a crossing was fully or partially closed excluding weekend and holidays.

For further information please contact: Ramallah: Bushra Mukbil mukbil@un.org; Gaza Strip: Raed Raqeb raqeb@un.org

The exchange rate between the US dollar and the NIS has slightly increased in July, 2008.

All fuel categories, with the exception of Benzene 96, experienced an increase in registered fuel sales during July, 2008. One of the main reasons for this increase could be that total effective closure days were 45% less in July than in June.

The Palestinian CPI figures for July 2008 show an increase of .68% from June 2008. CPI increased in the West Bank by 1.08%, and .57% in the Gaza Strip. Since beginning of 2008, food prices have risen by 7.2 % in the West Bank, 12.7% in the Gaza Strip. Transportation related costs have also increased by 8% in the West Bank, and 7% in Gaza.

Truck movement to Gaza has been restricted to the import of limited humanitarian supplies since 12 June 2007. Exports were suspended at the same time with only approximately 78 truckloads of strawberries and flowers grown with the support of the Netherlands exported in December 2007. Compared with June 2008, July data indicates a marked increase in the total of imported truckloads to the Gaza Strip, by approximately 58.4%. An important highlight for the month of July 2008 is gravel and cement were allowed into the Gaza Strip for the first time since mid June 2007, about 2,122 trucks of gravel (through Karni ) and 133 trucks of cement (through Sufa ).

The negative consequences of the closure of the Gaza crossings for Israel continued. The IsraeloPt trade balance – which had reached almost half a billion per quarter in the early part of 2007 – has dropped by 15 percent since the first quarter of 2007 – primarily as a result of declining imports from Israel into the oPt. A second notable finding is that despite the suspension of exports from Gaza, total oPt exports to Israel remained at the same level as during previous quarters indicating an increase in exports from the West Bank.

For further information please contact: Ramallah: Bushra Mukbil mukbil@un.org; Gaza Strip: Raed Raqeb raqeb@un.org

The number of new company registrations is used as a proxy indicator for the vitality of the local economy as well as the ability of the local economy to create new employment. New company registrations in the West Bank slightly increased in July 2008, by approximately .03%. However, if compared to pre-Intifada levels new company registrations have dropped by approximately 53.7%. As for Gaza, figures for the Ministry of Economy in Ramallah show that the number of new company registrations has remained zero, while data from the authorities in Gaza indicate 22 new registered companies for the month of July. Optimism among business people in Gaza is a possible factor that encouraged company owners to reactivate their registrations.

Similar to new company registrations, the area licensed for new construction is also used as a proxy indicator for economic vitality. If compared with June 2008, areas licensed for new construction for the West Bank increased in July by 34.50%. However, if compared with pre-Intifada levels, areas licensed for new constructions have dropped by approximately 35.22%. As for the Gaza Strip, areas licensed for new construction have increased by 58.9 % in July. This is due to the fact that municipalities in Gaza have lowered the fee for area licensing by 50%.

If disaggregated by type, and if compared with Q3-2007, it appears that in Q4-2007 non-residential construction decreased in the oPt by 70.6%, while residential construction slightly decreased by 1.41%.

Data on bank credit is used as a proxy indicator for perceptions of economic progress (increasing use of bank credit, particularly in the main productive sectors) or decline (decreasing use of bank credit). The Palestine Monetary Authority has adjusted the indicators for bank credit by economic activities starting Q1-2008. Due to such significant changes, it is not accurate to observe trends and developments and compare it to previous quarters using the old system.

Disaggregating bank credit by the type of credit, confirms the relative stability of the banking sector. Loans have decreased by 2%, and overdrafts have increased by 2%.

Disaggregating bank credit by the borrowing entity shows that consumer lending declined significantly in the first quarter of 2008. The drop is by 16% compared to the first quarter of 2007. One of the most likely reasons for this development is the continued risk-adverse stance of Palestinian banks.

Bank deposit data for the fourth quarter in 2007 indicates a continued sizeable increase in private sector deposits (both in terms of public and private sector bank deposits). Compared with the fourth quarter of 2007, bank deposits in January 2008 showed an increase of 5.66 percent.

In an efficient economy, an increase in the loans versus deposits ratio is a positive sign as moniesare not saved but invested or consumed, stimulating the economy. Between September 2006, and the end of January 2008, this ratio has steadily declined in the oPt signaling little optimism concerning the Palestinian economy which limits appetite for domestic investment and thus increases deposits. The sharp drop since the third quarter of 2007 signals heightened concern with regard to overall economic performance, most likely due to the events in Gaza since June 2007.

Similar to bank credit and deposits, data on the Palestinian stock exchange is used as a proxy indicator of Palestinian perceptions vis-à-vis the state of the national economy. Data for July 2008 shows a significant decrease in trade at the stock exchange both in terms of value and number of stocks traded. However, Al-Quds index has increased in July, by approximately 2%.