Publication: Economic Monitoring Report to the Ad Hoc Liaison Committee
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2019-04-30
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2019-04-30
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The main body of the report is organized in two chapters and two supporting annexes. Chapter I focuses on recent economic developments in the real, fiscal and banking sectors, while providing a near term outlook that highlights critical challenges facing the Palestinian economy. Chapter II looks at the impact of dual use restrictions on specific sectors in both the West Bank and Gazan economies and makes short and long run recommendations that would allow more activity and job creation. Annex 1 assesses the status of the World Bank recommendations to the AHLC meeting over the years, while Annex 2 has details of the dual use restrictions that are currently in place.
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“World Bank Group. 2019. Economic Monitoring Report to the Ad Hoc Liaison Committee. © World Bank. http://hdl.handle.net/10986/31550 License: CC BY 3.0 IGO.”
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Publication Economic Monitoring Report to the Ad Hoc Liaison Committee(World Bank, Washington, DC, 2019-09-26)After a steady improvement in the fiscal position over the past decade, the standoff over clearance revenues has severely constrained the PA budget, leading to a significant expansion in expenditure arrears. Going forward, however, uncertainty about a resolution for the clearance revenue standoff will weigh on the economy. Over the last two decades, the Palestinian economy has been driven by large inflows of transfers as other sources of growth have been long-hindered by the ongoing Israeli restrictions on movement and access. Under a baseline scenario which assumes a continuation of the Israeli restrictions, persistence of the internal divide between the West Bank and Gaza and a decline in aid levels, the Palestinian economy is expected to slip into a recession in 2020 and 2021, even if additional, one-off transfers from clearance revenues are made. As financial buffers are depleted, the reduced revenues will require sizable cuts in public spending, which in turn would translate in reduced consumption and investment. The decline in growth implies a sizable decline in real per capita income and a rise in poverty. The Palestinian financial sector continues to face substantial risks against the backdrop of the fiscal crisis. The negative impact of the deepening fiscal crisis on the quality of loan portfolios across the banking sector has started to materialize as both non-performing loans and classified loans have been on an upward trajectory. With the severe liquidity shortage facing the PA, it has resorted to domestic banks to finance its needs raising the sector’s exposure to the PA for the first time in a number of years. Banks are also rescheduling outstanding loans held by PA employees who are receiving a reduced salary, compounding the destabilizing effect on the sector. However, the fact that the PA is simultaneously building up an asset in the form of tax revenues not received from the GoI ameliorates the situation as the increased exposure may be seen as a temporary trend. Another cause of concern is a possible disruption in Correspondent Banking Relationships (CBRs) between Palestinian banks and their Israeli counterparts due to de-risking by Israeli banks. The immunity and indemnity package given by the GoI to banks with CBRs are set to expire in May 2020 and February 2021, respectively, when a longer term and more sustainable intervention is expected to be in place. While resolving the fiscal crisis is an immediate priority there remains a broader reform agenda to improve the economy and Palestinian living standards.Publication Economic Monitoring Report to the Ad Hoc Liaison Committee(World Bank, Washington, DC, 2020-06-02)The report reviews recent economic developments in the real, fiscal and banking sectors, while providing a near-term outlook that highlights critical challenges facing the Palestinian economy. Additionally, it looks at the opportunities and constraints facing digital infrastructure in the Palestinian territories, the development of which is critical to the future expansion of the digital economy. It makes short- and long-term recommendations that would allow more digital activity and job creation. This report assesses the status of the World Bank recommendations to the Ad Hoc Liaison Committee meeting over the years and identifies recent legal and regulatory advancements by the Palestinian Authority in the telecommunications sector.Publication Economic Monitoring Report to the Ad Hoc Liaison Committee(World Bank, Washington, DC, 2021-11-17)The Palestinian economy has started its recovery in 2021 as COVID-related (coronavirus) measures have been eased, but sustainable sources of growth going forward remain limited. Given the decline in the daily number of new COVID-19 cases, lockdowns have been significantly eased in 2021. This combined with the pickup of the vaccination campaign allowed consumer confidence to slowly pick up and business activity to gradually rebound. The economy is estimated to have grown by 5.4 percent, in real terms, in the first half (H1) of 2021, year-on-year. The improved economic performance was fully driven by the West Bank economy while Gaza’s economy remained almost stagnant in H1 2021 due to the 11-day conflict in May. Growth is expected to further pick up throughout the remainder of the year and reach 6 percent in 2021 as the West Bank economy continues to regain more of what was lost during 2020 and with the implementation of some Israeli confidence building measures supporting economic activity and facilitating reconstruction in Gaza. In the following years, growth is expected to hover around 3 percent as the low base effect weakens and as sources of growth remain limited given the ongoing restrictions on movement, access and trade. Unemployment remained stubbornly high in 2021, mainly driven by Gaza. The unemployment rate in the Palestinian territories reached 26.4 percent in the second quarter of 2021: 16.9 percent in the West Bank and 44.7 percent in Gaza, reflecting the particularly difficult economic situation in the Strip due to the effect of the 11-day conflict and the ongoing restrictions. The extremely high unemployment rate in Gaza comes hand-in-hand with deteriorating social conditions in the Strip. Estimates by the World Bank indicate that the recent conflict has pushed poverty in Gaza to 59.3 percent in 2021 (using 5.50 US Dollars a day (2011 PPP) international poverty line). This is 2.3 percentage points higher than the COVID-19 induced peak in 2020, and a 16.3 percentage point increase above the 2016-2017 values (latest available official data).Publication Economic Monitoring Report to the Ad Hoc Liaison Committee(World Bank, Washington, DC, 2018-09-27)The main body of the report is organized in two chapters with one annex. Chapter one focuses on recent economic developments in the real, fiscal and banking sectors, while providing a near term outlook that highlights critical challenges facing the Palestinian economy. Chapter two provided input on a vision for Gaza development including performance of the Gaza economy, living standards of the people of Gaza and strategy for Gaza development. It explores the nature of the decline of the Gazan economy and identifies the needs going forward. The annex assesses the status of the World Bank recommendations to the AHLC meeting over the years. The annex discusses fiscal sustainability, economic development and Gaza reconstruction and recovery.Publication Economic Monitoring Report to the Ad Hoc Liaison Committee(Washington, DC, 2016-09-19)The Palestinian economic outlook is worrying: recovering slowly from the recession of 2014, the per capita income growth has almost stagnated and projected growth levels will not support an improvement in living standards. Despite impressive fiscal consolidation efforts over the years, the Palestinian Authority’s (PA) fiscal situation remains fragile with a US$600 million financing gap projected for 2016. The main body of the report is organized in two chapters. Chapter II focuses on recent developments in the real, fiscal and banking sectors while providing a near term outlook that highlights critical challenges facing the Palestinian economy. In view of the need for far-reaching reform, Chapter III presents a stock take of World Bank recommendations to the AHLC meeting over the years, discusses the state of the issues, and suggests a way forward.
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