PMA Announces the Results of August PMABCI

Increase in the West bank and significant decrease in Gaza Strip

Source: PMA (2013). PMABCI, August 2013.

The Research and Monetary Policy Department of the PMA has released the results of PMA Business Cycle indicator (PMABCI) for August 2013. The PMABCI is a monthly index which  aims to capture the state and evolution of the  Palestinian business environment, reflecting fluctuations in production and economic activity overtime based on developments in the industrial sector. The construction of the indicator follows international standards and is based on qualitative data obtained from monthly business surveys of a representative sample of industrial institutions' owners/ mangers on the value of the abovementioned indicators during a specified period, and their expectations for the coming months. After that, the data is processed to construct a quantitative PMABCI.

During August 2013, the PMABCI has witnessed a decrease from -1.21 in July to -3.88. The source of this decline comes from Gaza Strip (GS), as its indicator decreased notably while in the West Bank (WB) the indicator increased from 2.21 to 4.65. This increase for the second consecutive month indicates recovery in the WB after the contraction in June. The figure also clarifies the apparent fluctuations in the WB economic performance in the previous months as a result of various political and economic factors, especially the unclear prospect regarding the peace process and resuming the Palestinian-Israeli negotiations, in addition to the continuous political schism between the WB and GS, and constraints on access and movements.

On the other hand, August indicator of GS  witnessed a notable decrease compared to July, reaching a negative value for the first time since December 2012. GS indicator has declined to -8.32 compared to 1.76 in July. This contraction comes in the opposite direction to the slow improvement trend that GS indicator witnessed during previous months. In addition to current political conditions in GS related to the Israeli siege and political schism, a new factor has emerged and influenced various aspects of life in GS. In specific, the recent political unrest in Egypt has cast its direct effect on Gazan economy, especially affecting the free mobility of individuals and goods both ways. As a result, GS might be slated for a further slowdown as long as the current crisis in Egypt deteriorates.

On the sectoral level, most of industrial sub-sectors have decreased during August, especially in the largest industries: food, textile, and furniture. The biggest decrease came from the textile sub-sector as its indicator decreased from 1.33 to -1.48, followed by the decline in the furniture sub-sector indicator form 1.75 to -0.66, and the decline in food industry indicator from 1.97 to 0.22.

It is noteworthy that the maximum value of the PMABCI is positive 100, while the minimum is minus 100. A positive value indicates favorable economic performance, and the bigger this value, the better the economy. A negative value indicates that economic performance is deteriorating, and it worsens the closer it gets to minus 100. On the other hand, a value close to zero indicates that economic performance did not change and is unlikely to do so in the near future.