The Research and Monetary Policy Department at PMA released the tenth issue of the Inflation Report for Palestine which covers consumer price developments in Palestine for Q1 of 2012 and inflation rate forecasts for the current and following year. The report points out that inflation rate in Palestine, which hit 2.2% during Q1 of 2014, is considered higher than similar rates recorded for the corresponding quarter of 2013 and for Q4 of 2013 which recorded a 2.0% inflation rate.
With regard to the causes for inflation, the report maintains inflation in Palestine is to a large extent an import and shows a great dependence on global prices, particularly food and fuel prices. The analytical approach employed in the analysis and forecasting of inflation is based on two variables, namely cost of imports taking into account inflation and exchange rates in countries which are commercial partners (in particular Israel) and the Global Food Price Index since food makes the most heavily weighted item in the Palestinian consumer’s basket.
The report shows that the increased prices of food substances, non-alcoholic beverages, alcohol, cigarettes and housing services played a key role in reaching the recorded level of inflation during the first quarter of 2014. The report also points out that price levels in Palestine are higher than the global averages, for both local and imported goods. In certain instances, prices are over three times higher than the global figure. An example is the price of beef which was priced at around 48 NIS per kilogram during the first quarter of 2014 compared with a global price of around 15 NIS.
With regard to forecasts, it is expected that consumer prices in Palestine will rise during the second quarter of 2014 by around 2.5%, whereas the projected annual inflation rate will reach an average of around 2.2% in 2014 and 1.8% in 2015. The projected inflation rates for 2014 reflect the expected changes in costs of imports as compared with 2013 which are predicted to rise by around 0.8% during 2014 and around 2.9% during 2015.