Gaza War Brings Further Deterioration to Economy, says Monetary Authority

RAMALLAH, December 22, 2014 (WAFA) – The Palestinian economy experienced further deterioration in 2014, particularly in the second half of the year, as a result to the recent Israeli aggression on Gaza, according to the Palestine Monetary Authority (PMA).

PMA’s Economic Forecasts Report (2015) revealed that the Israeli assault brought all economic activities and the entire production process to a halt.

It showed that real growth fell by -2.7 percent in 2014 due to deterioration in the security situation in the West Bank and the adverse impact of the Israeli economy on certain West Bank economic activities.

It foreshadowed a relative improvement by 2.9 percent for 2015.

The PMA estimated that the economy experienced a contraction in real growth rate by -2.7 percent accompanied by a decline in real per capita income by around 5.5 percent.

According to PMA’s estimates, private sector and public sector value added growth for 2014 has dropped by 3.5 percent and 2.1 percent, respectively, as compared to the previous year.

Estimates also point to a rise in unemployment rates to around 29.0 percent of labor force, compared to 23.4 percent in 2013, in addition to a rise in the inflation rate to 2.0 percent, compared to 1.7 percent in 2013.

As for 2015, PMA forecasts show a relative improvement by which real GDP may record a 2.9 percent growth compared to the previous year, which is expected to reflect positively on real per capita income pushing it up by 0.2 percent for the same comparison period.

It is also expected that private sector value added will increase by 3.6 percent, whereas public sector value added growth is expected to increase by 2.4 percent as compared to 2014.

PMA forecasts also show that the total final consumption is expected to grow by around 6.8 percent and the total investment by around 15.5 percent.

Exports are expected to rise by around 22.7 percent with a rise of 22.4 percent in imports, as compared to 2014.

Unemployment is expected to fall to around 27 percent of labor force, in light of the expected 2015 growth and the subsequent increase in job opportunities and employment. It is also expected that the general price level in 2015 will be around the levels of past years at 1.8 percent, as compared with 2.0 percent in 2014.

The economy is expected to grow by 8.1 percent during 2015, according to PMA, in case the political situation improves, the flow of grants remains constant and regular, and the funds to reconstruct Gaza are released.

Likewise, unemployment rates are expected to drop to around 23 percent of labor force under the aforementioned assumptions.

In contrast, PMA forecasts point to a retraction in real growth by -3.9 percent, as compared to 2014, if political and security conditions undergo a sharp deterioration. Real GDP per capita is also expected to drop by -6.7 percent.

It is expected that such a scenario will have adverse effects on unemployment rates, pushing them up to around 31 percent of labor force in 2015, concluded the PMA.