Palestine Economy Slowed in 2017 to Three Percent

The growth forecast in the Palestinian economy fell by half a percentage point between the beginning of 2017 and the year’s third quarter. The final data with the close of the year will most likely show a larger gap between the forecast and what was actually achieved on the ground, taking into consideration the security and political developments during the fourth quarter of this year.

Forecasts by official circles and international institutions pointed to a slowdown in economic growth to reach around 3% in 2017, down from 3.3% in 2016. However, the forecast ceiling has actually declined to reach 2.5% at the end of the third quarter due to the political and security conditions in Palestine and the region. As a result, unemployment rate rose from 27.6% in the beginning of the year to 29.2 in the third quarter, WAFA reported.

  Three Scenarios for Planning

Palestinian planning and forecasting were based on three scenarios according to expectations resulting from the political and security situation: an optimistic scenario that assumes a push for a solution to the conflict with the occupying regime of Israel; the second is pessimistic and assumes the situation will deteriorate toward further instability; and the third scenario assumes the situation will continue as it is, which is the baseline scenario on which planning and forecasts are based.

The Palestinian Monetary Authority, in its periodic reports on macroeconomic forecasts, attributed the slowdown in growth in the Palestinian economy to a number of factors, notably the continuing uncertainty, political stagnation and division, Zionists’ restrictions and impediments, the weakness of the public sector and the inability of the private sector to advance, ongoing settlement activities and restricting Palestinian activity in 62% of the area of the West Bank, in addition to the continuous siege on the Gaza Strip.

Based on the baseline scenario, the PMA and the Palestinian Central Bureau of Statistics expected the slowdown in the Palestinian economy in 2018, which will grow at a rate between 2.2% and 2.6%, and a decline in per capita GDP of between 0.1% and 2% as well as a high unemployment rate of between 28.7% and 29.3%.

  Strategic Projects

A power generating plant, a cement plant and visible activity in the development of industrial zones are the most prominent developments in the Palestinian economy during 2017. In addition to their strategic importance, their operation means a crucial reduction in the bill of Palestinian imports.

In Jenin in the north of the West Bank, investors led by the Palestinian Investment Fund, the investment arm of the Palestinian Authority, started the construction of the first conventional power plant with a capacity of 450 MW with investments exceeding $600 million. The plant is expected to become operational in 2019. Its construction coincides with the rise of many solar power generation projects, which the Palestinians hope will reduce import of electric power from Israel, whose annual bill exceeds $2 billion, as well as to reduce the cost of energy, which is one of the main obstacles to the manufacturing sector.

Electricity projects, from conventional and renewable energy, reflect the Palestinian government’s tendency to diversify energy sources that started in September of last year with the signing of the first agreement with the Zionist regime of Israel to supply electricity on a commercial basis. This will help in the reduction in costs, cancelling interest on late payments and doing away with price differentials that were added by the Zionist supplier company without consulting the Palestinian side, in addition to rescheduling the debts owed by the distribution companies, which the occupying regime usually deducted from Palestinian tax revenues in violation of the Paris Economic Protocol.

In the south, specifically in the city of Beit al-Lahm (Bethlehem), the PIF also began, in partnership with the Jordanian Manaseer Group, to build a cement factory at a cost of more than $300 million. Its production is expected to cover all the needs of the Palestinian market from this strategic product in a country with a building boom after five decades of deprivation.

The Palestinian market consumes around three million tons per year, 90% of which is imported from Israel while the rest comes from Egypt, Jordan, Turkey and Greece. The Palestinian import bill of this product is about $300 million annually.

The year 2017 has also witnessed a breakthrough in the development of industrial zones that for years remained projects on paper: one in the northern West Bank with Turkish investments, another in Beit al-Lahm in the south of the West Bank with a Palestinian-French partnership and a third in the east near the Jordanian border with Japanese funding. The three zones were so far able to attract 40 factories while negotiations are underway with outside investors to establish a fourth industrial zone in Al-Khalil (Hebron) where about 40% of Palestinian industrial facilities are located.

  New Economic Laws

A new step by the Palestinian government in its efforts to improve the investment environment came by issuing a series of economic laws and amending others during 2017.

For example: Earlier this year, the Social Security Law was passed allowing for the first time the establishment of a Palestinian social security institution covering all workers outside the civil service, numbering about one million workers and employees, including Palestinian workers in the occupied land, whose number is nearly 200,000.

The Palestinians rely on the role of the social security institution as a cornerstone for investing in the local economy based on the huge revenues expected from the premiums of the participants, in addition to the pension rights of Palestinian workers in Israel, which were accumulated over five decades to reach, according to the estimates of the Palestinian Ministry of Labor, about $8 billion. The Zionist regime is expected to transfer this amount to the Palestinian social security institution as required by the Paris Economic Protocol.