Economic Review, 1995 – 2003 1995 – 1999 2000 – 2003 Economic Indicators 1995-1999: Growth & Expansion: In 1999 the Palestinian economy enjoyed robust growth, making it the third consecutive year of rising real income per capita since the recession in 1995-96. Gross Domestic Product (GDP) increased by almost 8% in real terms in 1999, with growth particularly pronounced in the construction and tourism sectors. Gross National Income (GNI), aided by increasing labor income, rose by over 7% in real terms. The economic expansion is evidenced by soaring tax collection and rapid growth in bank credit and deposits. In 1999, tax revenue increased by 25%, and the Palestine Monetary Authority (PMA) reported credit to the private sector growing by 25% and bank deposits growing by 18% in New Israel Shekel (NIS) terms. While these vigorous growth rates reflect, to some extent, improvements in tax administration and the continued process of financial re-intermediation, they also support the existence of dynamic economic activity. Inflation has remained low, with the Consumer Price Index rising by only 3.3% in the twelve-month period through March 2000. The Only Way is Up: The strong economy brought with it a marked decline in the unemployment rate, to 10.9% in the first quarter of 2000, according to data from the Palestinian Central Bureau of Statistics (PCBS). Unemployment has declined from its peak in 1996, mostly as a result of new jobs created by the PA and significant job growth in the Palestinian private sector, in addition to a recovery in the number of Palestinians working in Israel. While data on external sector development is weak, both exports and imports of goods and services grew quite strongly in 2000, reflecting a large increase in tourism earnings and higher imports fueled by the expanding economy and falling poverty rates. [Top] 2000 – 2003: Down, But Not Out: The almost three years of Intifada in the West Bank and Gaza have had a crippling effect on the Palestinian economy. The Palestinian Stock market began operations in February 1997; two years later in 1999 the Al Quds index had achieved annualized growth of 53%. Continued success had been anticipated for the year 2000, but despite a stellar start to the year, the outbreak of the AlAqsa Intifada in September caused a drop in fourth quarter trading. As of the end of the first quarter 2003 the index has risen, from its all time low of 143.43 points on September 18, 2001, to 159.39 points. Although this information and these statistics pertain directly to the Palestinian Stock Exchange (PSE), these same trends can be seen across the various sectors of the Palestinian economy. The years following the outbreak of the AlAqsa Intifada, and the ensuing violence and restrictive measures enforced by the Israeli forces witnessed a halt, and even a reversal, in economic growth, yet the economy is rallying. The end of the second quarter on the Palestinian Stock Exchange has shown an increase of 25% of the overall value of the Index. Year-end statistics for 2002 show that although unemployment is still at an all time low of 31% across the Palestinian territories, economic activity in some sectors continues unabated. The overall percentage change in real GDP is estimated by the World Bank to have been a 26% drop between the years 2001 and 2002. This comes following the 13% drop witnessed from 2000 to 2001, but represents a tremendous downturn from the 7% annual growth witnessed between 1999 and 2000. Back to Business: No statistics or estimates are currently available on 2003 economic performance, but the population has become somewhat inured to the ongoing conflict and have begun to operate within the framework they have been given. This said, as with the stock exchange, insidious growth is beginning to seep into the economy. Construction on private homes continues unabated, providing daily wages to a small percentage of the population. The continued work in construction fuels purchasing power to some tiny extent, and as construction continues, business is created for associated secondary businesses such as the stone and marble manufacturers and retailers, electricians, plumbers and so on throughout the economy. In addition, according to a recent World Bank report, the continuing operation of the PA ensures that 125,000 people receive a regular monthly salary while providing essential services to the local population. This represents approximately one-third of the employed population. This, in combination with other forces and the level of cohesion displayed by Palestinian society, has been a key factor in ensuring that although economic development in the private sector has halted, it has not disappeared. Rate of Decline is Slowing: There is a level of cautiousness in the Palestinian economy today, yet this is being tempered by the need to return to the business of everyday life. It is this attitude that is fueling the largest proportion of growth in the West Bank and Gaza territories. Returning to 1999 GDP levels will take several years and will require a lifting of the economic sanctions imposed on the Palestinian territories; however, it does appear that the rate of economic decline is slowing despite the continued political instability. [Top]