A Modest Improvement in the Economic Activity
Ramallah, 23rd January 2023: The 70th issue of the Quarterly Economic Monitor (QEM) covering the economic performance of the main economic sectors in the Palestinian economy during Q2 2022 was released. Prepared by MAS in partnership with the Palestine Monetary Authority (PMA), Palestinian Central Bureau of Statistics (PCBS), and the Palestine Capital Market Authority (PCMA), it provides the general readership and specialists with a comprehensive and regular coverage of indicators about the performance of the different economic sectors in addition to important issues in social development and economic policies.
The Director General of the Institute, Mr. Raja Khalidi stated that the second quarter data shows a modest improvement in the economic activity driven by the improvement in the consumer spending and the fixed investments (non-buildings), in addition to improvement in the performance of agriculture and industry, and the recovery of tourism and education services. Despite these positive developments, the economy is yet to recover its pre-2020 levels. In addition, the economy witnessed an increased dependence on commodity imports as well as a decrease in external demand on Palestinian exports; this weakened any opportunity of recovery and entrenched more dependence of the Palestinian economy on the Israeli economy. On the other hand, the economic activity is still affected by the continuous increase in inflation rates, currency fluctuation, and rising interest rates that would curb individuals’ and companies’ spending and investment during the coming period.
The most notable developments in the Palestinian economy in Q2 2022 was as follows:
Gross Domestic Product (GDP): During Q2 2022, GDP at constant prices (2015 base year) decreased by 1.1% compared with the previous quarter, reaching about USD 3,858,6m. This resulted from an increase of 0.9% in the West Bank against a slight growth of about 2.1% in the Gaza Strip. This decline in GDP reflected as a rise of about 0.5% in real GDP per capita (an increase of about 0.3% in the West Bank and 1.4% in the Gaza Strip), reaching USD 765.4 (USD 1,101.2 in the West Bank compared with USD 316.9 in the Gaza Strip).
Employment and Unemployment: The unemployment rate in Palestine decreased by 1.2 percentage point between Q2 2022 and the previous quarter of the same year, reaching 24.2% (13.8% in the West Bank and 44.1% in Gaza Strip). The average daily wage in Palestine stood at NIS 143.2, distributed as NIS 118.0 for workers in the West Bank, NIS 55.9 in the Gaza Strip, and NIS 271.5 in Israel and its colonies. Around 41% of the private sector employees received less than the minimum wage, earning NIS 948 on average.
Public Finance: During Q2 2022, net public revenues and grants reached NIS 3.9bn compared with NIS 4.1bn in the previous quarter. On the other hand, during the same period, public expenditures decreased by 12.2% to about NIS 3bn. Changes in both public revenues and expenditures, led to a surplus of about NIS 0.9bn in the overall balance after grants and foreign aid. During this quarter, government arrears amounted to NIS 1,521.5m and public debt dropped by 4.4%, to USD 3.5bn (NIS 12.1bn) compared with the previous quarter.
Banking Sector: By the end of Q2 2022, credit facilities decreased by 1.8% compared with the previous quarter, reaching USD 10.6bn, 20% of which is granted to the public sector. Customer deposits declined by 2.2% during the same period to reach USD 16.2bn. Banks’ net profits for this quarter amounted to USD 54.5m, a growth of 3.8% compared with the previous quarter.
Palestine Stock Exchange (PEX): The market value of the shares of companies listed on PEX reached USD 4.7bn by the end of Q2 2022. However, it grew by 6% compared with the previous quarter. Also, Al Quds index closed at 666.8 points, an increase of 9% compared with the previous quarter.
Inflation and Prices: In Q2 2022, the Palestinian economy witnessed inflation of 1.93% compared with the previous quarter. Consequently, for those who receive and spend their income in shekels, the purchasing power declined at the same rate over the consecutive quarters. As for those who receive their wages in U.S. dollars and cover their expenses in shekels, their purchasing power increased by 2.64%. Given that the JOD is pegged to the USD at a fixed exchange rate, the purchasing power of the JOD varied basically in line with the U.S. Dollar.
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