Palestine Monetary Authority published Position Paper: The Expected Economic Impact of Covid-19 Crisis on the Palestinian Economy In 2020.
The Foreword of the Position Paper, prepared by the Research and Monetary Policies Department, states that the Palestinian economy operates in a highly risky and challenging environment, which over the past years has caused a series of crises and shocks, both political and economic, most recently the Palestinian clearing revenue crisis with the Israeli side in 2019.
The Foreword also points out that the year 2020 is no exception. The Palestinian economy was exposed at the end of February to a new crisis of a global character; the Covid-19 crisis. It is the first of its kind for Palestine to be exposed to in its modern history and is expected to have many repercussions at the level of some activities and economic sectors, and at the level of the macroeconomy.
The Position Paper addresses global economic developments in the context of the Covid-19 crisis (effects on economic growth), where the paper emphasizes that the world economy would suffer from the impact of significant shocks to trade and production in major economies, particularly in the tourism, travel, transport and other services sectors.
As for the impact of global developments on the Palestinian economy in the light of the Covid-19 crisis, it is expected that the financial dealings of the Palestinian economy with regional and global financial institutions and markets (although limited) will include some potential risks, whose impact varies depending on their source and type. In this context, five major sources of potential risks that could move to the Palestinian economy in general and the banking sector in particular can be identified through its dealings with external institutions and markets, including foreign investments, interest rates, exchange rates, oil and raw material prices, income flows and current balance-of-payments transfers.
The paper addresses the extent of the damage expected to the Palestinian economy due to the repercussions of the outbreak of this virus, according to the estimates of Palestine Monetary Authority based on two scenarios; first, the continuation of the crisis for four months, and the second scenario is the continuation of the crisis for six months. The measures taken by Palestine Authority focus on injecting more liquidity into the economy, to mitigate the repercussions of the crisis, as well as to stimulate economic activity.
Palestine Monetary Authority noted that the findings of the Position Paper are still preliminary and will often be adjusted in the light of developments and events, and their expected effects on the scenarios related to expected economic growth and the extent of its decline.
For the full Position Paper, click here.