Ramallah [Palestine], December 31: Palestinian economy was hard hit by the Israeli aggression which started on October 7 and has led to a decline in gross domestic product (GDP) in Palestine during the fourth quarter 2023 by 33 percent, and is expected to leave a negative forecast for 2024.
This was announced in a joint press release issued on Saturday by the Palestinian Central Bureau of Statistics (PCBS) and the Palestine Monetary Authority (PMA) on the performance of the Palestinian economy for 2023 along with the economic forecasts for 2024.
The continued Israeli aggression on the Gaza Strip during the fourth quarter of 2023 and the following repercussions on the economy in the West Bank, will lead to a decline in Palestine's GDP in 2023 at about of 6 percent, with an estimated value of $1 billion compared to 2022, where the Palestinian economy was supposed to achieve growth by 3 percent in the same year, said PCBS and PMA.
Palestinian GDP dropped by 33 percent in the fourth quarter of 2023 due to Israeli ongoing aggression on the Gaza Strip and repeated raids of the West Bank.
This decline is also due to a series of factors, most notably the sharp decline in external support, the continued deduction of parts of tax revenues (clearance) by the Israeli occupation over the year which exceeded 2 billion Israeli shekels; where the latest of which was the deduction of salaries of Gaza Strip employees.
Gaza Strip domestic product declined in the fourth quarter of 2023 compared with the same quarter in 2022 by more than 80% as a result of the Israeli aggression, which led to the near-total disruption of economic life and the destruction of most of the components of production.
Also, GDP recorded a sharp decline by 22% in the West Bank, due to the continued raids of the Israeli occupation on the cities, towns and camps of the West Bank, as well as the closure policy between West Bank governorates and the layoffs of more than 90 percent of Palestinian workers in Israel and the Israeli settlements, which all, in return, created economic contraction and distorted its economic structure; and thus, it led to the Palestinian government inability to fulfill its financial obligations toward the public and private sectors.
Unemployment rates rose to reach their highest levels, recording 74 percent in the Gaza Strip during the fourth quarter of 2023.
Also, economic indicators during the fourth quarter of 2023 showed a decline in the contribution of the Gaza Strip to the gross domestic product in the State of Palestine from about 34 percent over the years before 2006 to less than 5 percent, which led to a structural distortion in the Gaza Strip's economy affected its ability to recover.
Estimates also indicate that about half of the establishments were completely or partially destroyed as a result of the Israeli aggression on the Gaza Strip.
The value added of all economic activities in Palestine dropped in the fourth quarter of 2023 compaed to the same quarter of the previous year, where construction activity recorded the highest decline reaching 39 percent (27 percent in the West Bank and 96 percent in Gaza Strip), followed by agriculture activity with a decline of 38 percent (12 percent in the West Bank and 93 percent in Gaza Strip), then the services activity by 33 percent (21 percent in the West Bank and 77 percent in Gaza Strip), industry activity by 28 percent (24 percent in the West Bank and 92 percent in Gaza Strip), as a result of which all economic activities in Palestine declined in 2023 compared to 2022, where the constructions activity recorded the highest decline of 12 percent, followed by agriculture, industry activities by 8 percent, and services activity by 6 percent.
At the expenditure level, gross consumption decreased by 33.1 percent (21 percent in the West Bank and 80 percent in Gaza Strip) in the fourth quarter of 2023 compared to the same period in the previous year.
The private consumption by households and non-profit institutions and serving households declined by 33 percent, where public consumption (Government) decreased by 33.4 percent during the same period, while gross investment (gross capital formation) decreased by 30 percent. During 2023, GDP per capita declined by 8 percent and private and government consumption by 3 percent and 8 percent, respectively, as well as a decline in the gross investment by 5 percent.
At the level of the Palestinian trade with the outside world, the fourth quarter of 2023 witnessed a sharp decline in the value of exports of goods and services by 33 percent along with a decline of 33 percent in imports during the same period, as a result of the fact that the value of imports is about three times the value of exports, which led to a decline of 33 percent in the trade balance deficit.
It is worth mentioning that before 2006, the volume of trade for the Gaza Strip reached 23 percent of Palestine's total trade.
Yet, this percentage declined below 4 percent in the fourth quarter of 2023. During the recent aggression on Gaza Strip, supply chains from and into the Gaza Strip were cut off, which warns of a health catastrophe in all of Gaza Strip due to the sharp decline in medicines and healthcare needs and necessities. While, in 2023, exports, imports and the trade balance recorded relative stability compared with 2022.
At the labour and workers level, Palestine is experiencing a regional gap in unemployment rates, during the fourth quarter of 2023, the unemployment rate in Palestine is expected to reach 46 percent (29 percent in the West Bank and 74 percent in the Gaza Strip). Unemployment rates in Palestine are estimated to rise from 25.5 percent in 2022 to 30.7 percent in 2023 as a result of the Israeli aggression on the Gaza Strip and its repercussions on Palestine. The unemployment rate will reach 18 percent in the West Bank and about 53 percent in the Gaza Strip.
Moreover, estimates indicate that there will be more than 651,000 unemployed persons in Palestine (393,000 unemployed persons in the Gaza Strip and 258,000 unemployed persons in the West Bank) in 2023.
In 2023, consumer price index in Palestine increased about of 6 percent compared to 2022 (4.8 percent in the West Bank and 9.7 percent in Gaza Strip), where prices of some basic commodities rose, which negatively affected the Palestinian household expenditure along with a decline of 5.5 percent in purchasing value during 2023 in Palestine (4.6 percent in the West Bank and 8.9 percent in Gaza Strip); and thus, affecting poverty levels in Palestine, which rose to unprecedented levels, especially in Gaza Strip. Furthermore, the recent Israeli aggression on the Gaza Strip in the fourth quarter of 2023 has led to an increase in prices in the Gaza Strip by more than 30 percent.
Expectations of a continued decline of the Gross Domestic Product in 2024 for the second year respectively.
Two reports issued by the PCBS and the PMA on the economic forecasts for 2024 said that the Palestinian economy is expected to witness a sharp decline in its performance during 2024, after the fact that the Gaza Strip has been under unprecedented Israeli aggression since the beginning of the fourth quarter of this year.
Hence, it is expected that this brutal Israeli aggression on the Gaza Strip will continue with the same intensity and brutality until January 2024. Thus, the consequences of this will not only be limited to the Gaza Strip, whose buildings and infrastructure have been destroyed but also will extend to reach the West Bank, and negatively affect most of its economic sectors and activities.
Accordingly, this Israeli aggression is expected to cause a decline in the levels of domestic demand, especially in regard to investment and consumption expenditure for individuals and households, as a result of the almost complete interruption of the business cycle in the Gaza Strip. In addition, economic activity in the West Bank has been affected by the consequences of this aggression, by the decline in commercial movement, passengers' movement and Palestinian employment in the Israeli labour market, and by clearance money movement with the Israeli side and other vital sectors, whose outcome has been reflected in the overall performance of the Palestinian economy.
Based on this scenario, the results of the forecasts indicate that the performance of the Palestinian economy will continue to decline during 2024 and for the second year in a row by a percentage of almost 5 percent, driven by the decline in consumption and investment expenditure and exports, and the decline in the value added of economic activities. It is expected that a rise in unemployment rates will accompany this decline, where it is expected to reach 35.1 percent, compared with 30.7 percent in 2023.
In view of the fact that the environment in which the Palestinian economy operates involves a great deal of risk and uncertainty, these forecasts have included an analysis of potential risks of varying degrees (the optimistic scenario and the pessimistic scenario), which, if they occur, are expected to have positive or negative repercussions on the economic performance in the near term.
Source: Times of Oman