The results of the Palestinian Monetary Authority's monthly activity index, which measures the performance of the seven main sectors of activity, showed an increase for the third consecutive month in the overall index, of -14.7 points in October to -13.7 points in December, driven mainly by the improvement in the economic situation in the Gaza Strip.
In the West Bank, the overall index fell from -1.3 points in November to -2.2 points in December, due in particular to the rise in transport costs and the price of raw materials. Businesses surveyed in the West Bank reported a greater reduction in the level of production than in the level of sales, which led to lower inventories. Their expectations remain positive for employment and production levels over the next three months.
In the Gaza Strip, the overall index went from -47.5 in November to -42.0 in December, but this improvement remains very fragile. Thus, the agricultural index rose from -5.9 to -1.5 and the trade index rose from -33.6 to -29.9.
On the other hand, the manufacturing index fell from -5.0 to -7.5 due in particular to the restrictions imposed on imports. Businesses surveyed in the Gaza Strip reported an increase in the level of production greater than that of sales, which led to an accumulation of inventories.
Public finance crises make PA announcements unrealistic
The Palestinian government has been steadily announcing new projects in the governorates where it holds its weekly meetings despite a difficult financial situation. For the second consecutive month, civil servants’ salaries could not be paid at the full rate (75% in December) while the government is also facing a sharp drop in support from international donors, which has been divided by five in less than ten years.
The Palestinian Authority’s room for maneuver to deal with the crisis is cruelly limited: the tax collection rate has increased by 28% in one year, the current levels of debt prohibit resorting to bank loans again and payment arrears to suppliers are reaching levels not seen since the creation of the Authority.