OPT socio-economic report (May 2008) – UNSCO

Since 1996 UNSCO has continually monitored and reported on socio-economic conditions in the occupied Palestinian territory and in the process established an extensive socio-economic database. UNSCO does not create raw data but rather uses available data which, in the occupied Palestinian territory is relatively abundant. However, the data that is available tends to remain dispersed and is not always automatically shared between institutions. The objective of the database is to bring together in one place a wide variety of data on socio-economic conditions and by doing so present a broader, more detailed perspective on socio-economic conditions. The purpose of this report is to: 1) broaden the access to this database through publication of the most recent data gathered; and 2) provide readers with up to date information on socio-economic conditions in the occupied Palestinian territory.

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 continued its decrease in May, 2008. The declining dollar could benefit the Palestinian economy, as it could make imports cheaper.

Registered fuel sales in the Gaza Strip increased in May, when compared to those in April 2008 which saw the highest number of closure days in 2008.

The Palestinian CPI remained steady in the month of May 2008. However, it has slightly decreased in the West Bank, by .52%, mainly due to the decrease in prices of food and soft drinks (by 1.54%). In the Gaza Strip, the CPI increased by 1.07%.

Truck movement to Gaza has been restricted to the import of 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 April, May data indicates a decrease in the total of imported truckloads to the Gaza Strip, by approximately 21.24%.

The negative consequences of the closure of the Gaza crossings for Israeli 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 May 2008, by approximately 3.41%. However, if compared to pre-Intifada levels new company registrations has dropped by approximately 48.9%. In Gaza, new company registrations have been at an all-time low of zero since November 2007.

Similar to new company registrations, the area licensed for new construction is also used as a proxy indicator for economic vitality. If compared with April, areas licensed for new construction for the West Bank increased in April by 6.4%. However, if compared with pre-Intifada levels, areas licensed for new constructions have dropped by approximately 46.7%. As for the Gaza Strip, areas licensed for new construction have decreased by 36.2% in May, if compared with April.

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 provides adjusted monthly data once every three months. The last six months of 2007 show a distinct decline in the use of bank credit, a trend that is particularly evident during Q4-2007 in the main productive sectors (manufacturing, construction, general trade). In contrast, the use of bank credit increased by over 32 percent in the financial services sector, most likely as a preventative effort by banks to stave off potential implications of severed relations with Israeli banks. Bank credit to the public sector has more than tripled if compared with the pre-Intifada period.

Disaggregating bank credit by the type of credit, confirms the relative stability of the banking sector. The ability of the PA to resume regular salary payments will have had some impact in the decrease of loans.

Disaggregating bank credit by the borrowing entity shows that consumer lending declined significantly in the third quarter of 2007 and continued to drop in the fourth quarter. The most likely reason for this development is the continued risk-adverse stance of Palestinian banks combined with the recommencement of regular payment of PA salaries which has allowed a number of PA staff to pay off existing loans reducing the demand for credit.

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 January 2007, bank deposits in December 2007 showed an increase of 18.3 percent.

In an efficient economy, an increase in the loans versus deposits ratio is a positive sign as monies are not saved but invested or consumed, stimulating the economy. Between September 2006, and the end of December 2007, this ratio steadily declined by over 26 percent in the oPt signaling little optimism concerning the Palestinian economy which limits appetite for domestic investment and thus increases deposits. The sharp drop in the third and fourth quarters 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 May 2008 shows a decrease in trade at the stock exchange both in terms of value and number of stocks

traded. The Al-Quds index has also declined in May, by approximately 2.42%.