PMA has published its Annual Report 2017. The Report constitutes of four chapters; they address macroeconomic developments, public finance developments, external sector developments (including balance of payments and foreign trade), and development in the Palestinian financial sector (PMA, banks operating in Palestine, and non-bank financial institutions), respectively.
H.E. Mr. Azzam Shawwa, the Governor of PMA, said the Annual Report 2017was published while several economic and political developments were taken place internationally, regionally, and locally. They led to slowdown in growth locally in 2017 whereby such slowdown was accompanied by slight increase in the deficit of the government finance and drop in the deficit of the current account of the balance of payments. Several developments also took place internationally and had repercussions on performance of major economies. Global economy had its best performance in seven years as a result of improvement in global trade activity with a recovery in investment in developed countries and strong growth in emerging economies of Asia and Europe. OPEC’s reduction of oil production helped recovery in oil prices and gradual improvement in many oil-exporting countries. However, regionally, political conflicts and turmoil continued in the Middle East and North Africa region. New tension also appeared in the relationships among Arab Gulf countries. Hence, economic conditions varied between downturn and acceleration. However, slowdown in growth hit lowest level since the global financial crisis took place ten years ago.
Locally, according to the Report, the Palestinian economy decelerated in 2017, which was consistent with PMA’s projections, registering a 3.1 percent growth compared to 4.7 percent in 2016. Real GDP (in 2015 prices) registered USD13.7 billion due to downturn in Gaza Strip economy despite the acceleration in the West Bank. Gaza economy slipped again into an economic downturn after two successive years of acceleration registering a 0.3 percent drop compared to a 7.7 percent growth in 2016. Economic growth in the West Bank accelerated in 2017 registering 4.3 percent in 2017 compared to 3.0 percent in 2016.
General consumer prices in Palestine slightly grew by 0.2 percent (compared to price deflation of approximately 0.2 percent in 2016) due to an international increase in the price of basic commodities and growth of prices in Israel.
High unemployment rates, especially in Gaza Strip, are among the key challenges of the Palestinian economy. Such rates rose to approximately 27.7 percent of the total labor force compared to 26.9 percent in 2016. This occurred against the backdrop of a rise in unemployment rate in Gaza Strip from 41.7 percent in 2016 to 43.9 percent in 2017 and a drop of unemployment rate in the West Bank from 18.2 percent in 2016 to 17.9 percent in 2017.
In public finance, according to the Report, a noticeable improvement in tax revenue and slight improvement in clearance revenue, but a drop in non-tax revenue and foreign aid occurred. These consequently led to a decline in public revenue and aid by approximately 5 percent compared to 2016 to register around NIS 15,982.5 million. Actual public spending dropped by about 1.1 percent compared to 2016, to register approximately NIS 14,601.8 million. In conclusion, the developments led to surplus in the overall balance after aid (on cash basis) by approximately NIS 1,189.1 million compared to a surplus of NIS 1,684.3 million throughout 2016. Foreign aid contribute to changing the deficit into a surplus. However, government arrears increased during 2017 by approximately 2.8 percent compared to 2016. At the same time, public debt (measured in U.S. dollar) rose towards the end of 2017 by 2.4 percent compared to the end of 2016 to reach USD 2,543.1 million (NIS 8,849.7 million) or 17.5 percent of the nominal GDP.
The current account in the balance of payments of 2017 registered a deficit of USD 1,563.7 million, which was an improvement of 19.5 percent compared to 2016. The deficit was 10.8 percent of the GDP compared to 14.5 percent in 2016.
H.E. Mr. Azzam Shawwa said, notwithstanding the difficult political conditions Palestine underwent, the Palestinian banking sector experienced many achievements in 2017 thanks to the efforts of PMA to enhance the supervisory and legal framework that regulated the banking sector institutions and supported it with various supervisory systems. PMA also continued to strengthen its Arab, regional, and international relations in order to boost relations between the Palestinian banking system and its regional and international surrounding to avert risks, which the Palestinian banking system was prone to under current circumstances.
Moreover, PMA continued its big efforts to strengthen financial inclusion in Palestine securing many achievements in this respect and in economic and financial research and in specialized reports in economic, banking, and financial areas. The outcome of these measures had their positive impact on the financial indicators of the Palestinian banking sector; hence, liquidity levels improved where such improvement coincided with an increase in assets, customer deposits, and increase in credit portfolio and improved its quality, drop in default rate, and improved capacity of the banking sector to confront expected and unexpected risks.
The Report shows that the overall assets of the banking sector rose at the end of 2017 by 11.6 percent to register USD 15,850.2 million. Direct credit facilities experienced an increase of approximately 16.8 percent to reach around USD 8,026.0 million indicating more use of financial intermediary among surplus and deficit units in the economy and creating more financing opportunities and contributing to the economic development process. Total deposits (bank and non-bank) increased by 11.7 percent to reach USD 13,117.8 million. The equity of the banking sector rose by 12.4 percent to register USD 1,891.2 million.
PMA’s expects the Palestinian economy to continue its slowdown in 2018. Real economic growth (baseline scenario) is expected to slow down to 2.4 percent compared to 3.1 percent in 2017. This performance is expected to materialize while the political and economic situations of 2017 in Palestine continue to be the same, including continuation of restrictions at border crossings, restrictions on freedom of movement of people and goods, continuation in the increase of Palestinian workers in Israel at the same previous rate, continuation of Gaza reconstruction at the same pace. Additionally, it is expected that this performance occurs while the Palestinian government continues the austerity policy, the rates of the revenue growth and government expenditure stay the same, donor countries’ aid to the Palestinian government’s treasury continues to drop.
Finally, the Research and Monetary Policy Department of PMA regularly publishes annual reports of PMA. These reports are key references for research institutions and those concerned with the economy as well as postgraduate students in Palestine since they are packed with deep analysis based on most the up-to-date and accurate available data.