The Research and Monetary Policy Department (RMD) at the Palestine Monetary Authority (PMA) issued PMA's Annual Report for the year 2013. The report falls into four chapters, reviewing several developments in nationwide and worldwide economies, public finance, the foreign sector, including the foreign trade of goods, and the Palestinian balance of payments.
In its larger part, the report throws light on recent developments seen on the Palestinian financial sector's arena. It reviews those achievements that PMA has made with a positive impact on the financial indicators of the banking sector. It also looks into other developments seen by non-banking financial institutions, with specific reference to specialized credit agencies, money-exchange agencies, Palestine Exchange, the insurance sector, real estate mortgage sector and financial leasing.
The report has come into being in concurrence with several significant economic and political developments, said PMA's Governor, Dr. Jihad Al Wazir highlighting that those developments have contributed to slowing down global economy at large. There are growing concerns that some political and economic turbulences in several countries around the world will exacerbate. Crises have already curbed important economic polices originally introduced to motivate the economy, with fears of another economic recession looming on the horizon.
"The Palestinian economy is, to some extent, immune from the direct consequences of global and regional developments of 2013", Dr. Al Wazir said.
He still remarked that Palestine is beset by several unique problems and challenges, which discouraged a good economic performance.
"There are restrictions and obstacles imposed by the [Israeli] occupation and a political bottleneck on the one hand. This reality is worsened by a weak public sector and failure on the part of the private sector to reinforce economy, on the other hand."
The result was a continued slow-down of economy and increasing doubts on the resilience of Palestinian economy to achieve sustainable growth rates, according to Al Wazir.
The Real Gross domestic product (G.D.P.) in 2013 slowed down sharply to around 2.1% compared with 5.9% and 12.2% in 2012 and 2011, respectively. The prices in Palestine maintained relatively low inflation levels, with inflation standing at 1.7% in 2013 compared with 2.8% in 2012. The unemployment rates in Palestine continued to rise during the year to a rate of 23.4% of total manpower compared with 23.0% in 2012. Even the achieved growth is not that enough to generate the number of jobs necessary for reducing unemployment rates or at least making them constant.
PMA's forecasts, in light of the baseline scenario (before the Israeli aggression on Gaza Strip), show a slight improvement in the performance of Palestinian economy throughout the year 2014 to 2.6% compared with 2.1% in 2013. Such forecasts, nevertheless, will most likely be diminished by a destroyed infrastructure in Gaza, which brought to a halt industrial, agricultural and service institutions. The situation exacerbates with the tightened Israeli measures against the West Bank in 2014 summer.
On public finance, the report highlighted a rise in 2013 of the total balance deficit (before grants and assistance) by around 2.2% compared with that of the previous year. It was mainly affected by the remarkable increase of tax refunds and expense on salaries and wages. Another reason is the accumulation of more delayed payments rising by around 30.2% in 2012-2013. The public debt dropped by around 4.3% in 2013 to US$2,376.2 million as it was mainly affected by a decline in local public debt, which accounted for 53.3% of total public debt. In effect, the public debt's ratio to GDP fell from 24.2% in 2012 to 19.9% in 2013.
On the Palestinian foreign sector, the current account in the balance of payments of 2013 recorded a deficit of US$1,317.4 million, accounting for 11.0% of GDP compared with a deficit of 27.5% of GDP in 2012.
In a different context, Dr. Al Wazir said PMA made several successes in 2013 reflecting positively on the performance and stability of banks operating in Palestine, notwithstanding political and economic adversities lingering in the region and worldwide and a highly precarious local environment. Along those lines, PMA pledged more support for the banking infrastructure to bolster customers' trust in the banking system. It issued, to that end, the Law regulating the Palestinian Deposit Insurance Corporation and kicked off Phase II of the International Banking Account Number "IBAN" project. It also launched a project for the real-time gross settlement of trading transactions in the stock market through the BURAQ system. It also created a special unit for supervising the significant payment systems in Palestine, improved the clearance system and opened an account for the Palestinian Government with the PMA as a prelude for the issuance of public bonds.
According to the report, the outcome of such measures has positively affected the financial indicators and those other indicators of the Palestinian banking system. Total bank assets rose by the end of 2013 to US$11,190.7 million accounting to 11.4% compared with the figures attained by the end of 2012. The direct credit facilities portfolio also amounted to around US$4,480.1 million, rising up by around US$281.1 million, accounting to 6.7% of relevant figures by the end of 2012 The implication is that more work is done on striking a financial balance between the surplus and economic deficit, the creation of more financing opportunities and contribution to economic development. Customers Deposits rose up to US$8,303.7 million, an increase by 10.9% compared with the figures of 2012. Additionally, the banks' equity rose by 8.3% amounting US$1,359.9 million, an indication of an increased ability by banks to deal with possible risks.
PMA has also shored up its capital with the aim of increasing its resilience against the risks it faces while exercising its mandated powers and responsibilities. By the end of 2013, PMA's equity rose by 2.2% amounting US$94.1 million, thanks to an increase in the paid-up capital by around 3.2%. The move was achieved by depositing with the capital account the profits accruing from PMA's transactions.
Check out the full report here.