Hasnaa Al Rantisy – Palestine Economy Portal

Translated by Tamara Barakat

Nasser Abdel Karim, economic analyst, attributed the increase in the growth rate during 2015 to 3.5% to the improvement in the economic conditions in the Gaza Strip, due to the reconstruction efforts.

The reconstruction of the Gaza Strip led to the increase in its growth rate to 6%, after having severely plummeted during 2014 due to the Israeli aggression on the Strip. Conversely, the growth rate in the West Bank declined during 2015 in comparison with 2014.

Abdel Karim explained that the lack of growth in the West Bank resulted from the decline in external financial aid and grants, the decline in the role played by banks, and the lack of progress on the political track.

He also believes that there will be no significant changes in the growth rate during 2016, as the reason behind its increase last year was the reconstruction of Gaza and not any real investments or economic activities.

He forecasted that the growth rate might remain the same in the West Bank, while in Gaza it might decline since the reconstruction process is taking place much slower than anticipated, or it might increase but very slightly.

“The West Bank might witness a very slight increase in growth rate,” he added. “However, no surprises will occur since the situation on the ground remains as is.”

Consequently, “I doubt that the economy would grow by 3.5% as forecasted by the Palestine Monetary Authority in its annual report. And it would be very good if we are able to reach a 0.5 – 1% growth rate,” he continued.

The Truth behind the Increase in Revenues

The annual report published by the Palestine Monetary Authority (PMA) forecasted an increase in government revenues. The report attributed the increase to the official resumption of imports into the Gaza Strip and the end of good smuggling through tunnels. In addition, merchants are no longer hesitant about disclosing data and clearance bills to the Ministry of Finance.

Moreover, the report mentioned that the increase in the balance of payments deficit would also lead to an increase in government revenues, for the increase in imports causes an increase in the VAT and import duties.

It also stated that there was an improvement in the follow up on and collection of taxes. However, the increase in imports failed to contribute to put an end to the actual deficit in the Palestinian Authority’s budget, which forced the PA to depend on borrowing. Consequently, public debt increased. Also, the private sector’s savings increased as well.