The PMA Business Cycle Index (PMABCI) – June 2020

Continuous improvement in the West Bank and decline in Gaza

The results of PMA Business Cycle Index (PMABCI) revealed that the overall index managed to pick up during June, but remains in the negative zone at around -29.2 points compared to -51.8 points in the previous month. Most firms resumed their operations during June as the government lift most of coronavirus (Covid-19) restrictions, but maintained the state of emergency. The overall index improvement resulted from the rise in the West Bank, despite the fall in Gaza Strip.

In West Bank, its index continued to increase but it was insufficient to achieve pre-health crisis levels. However, it recovered from -58.3 points in May to about -22.9 points this month due to rises in all surveyed sectors. The manufacturing sector has witnessed the biggest increase as its index, grew from -17.5 points to -0.8 points, followed by the trade index, which rose from -30.0 points to -16.9 points. The remaining indices have picked up as well: the agriculture (from -5.4 to -0.5 points), the construction (from -2.1 to -1.7 points), and the transport and storage (from –2.5 to -2.2 points). Moreover, the indices of IT and communications, and renewable energy have slightly risen, scoring -0.8 points and -0.1 points, respectively.

According to the surveyed firm owners, the production and sales in the West Bank during June have slightly improved. Therefore, they expect some higher production and employment levels in the three coming months.

At the same time, the economic activity in Gaza Strip, despite not experiencing lockdown (due to the health crisis), has been affected by the regional and global developments. During June, Gazan index failed to maintain increasing and resumed declining, registering nearby -44.2 points compared to -36.6 points in May. This significant decline was led by the deterioration in the trade index from -20.6 points to -29.5 points, followed by the decline in agriculture index from -4.9 to -5.9 points. However, the remaining indices have slightly picked up, headed by the storage and transport (from -1.9 to -0.9 points), followed by the construction (from -2.5 to -2.0 points), the manufacturing (from -5.8 to -5.4 points) and IT and communication (from -0.6 to -0.4), while the renewable energy index settled at -0.1 points.

The consequences of Corona pandemic pose new challenges to Gazan economy, which has been suffering from the blockade and the deteriorating economic conditions for years. Owners of Gazan surveyed firms indicated weak level of domestic production and sales, and accumulated inventory during June. Moreover, they expressed concerns on the production and employment levels in the three coming months.

It is noteworthy that the extended PMABCI is a monthly index, which aims at capturing the state and evolution of economic activity in Palestine by tracking sectoral performance (especially fluctuations in production, sales and employment levels). The overall index is simply the sum of all sectoral indices. Its maximum is positive 100 points, while the minimum is minus 100 points; a positive value indicates favorable economic performance, while a negative value indicates bad performance. 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.