The Palestinian Central Bureau of Statistics (PCBS) has recently released new economic and social data which has greatly enhanced our understanding of the Palestinian economy. The new data includes the population census for 1997 and the preliminary national accounts for 1995 and 1996.


The PCBS concluded the first Palestinian census on population, housing and establishments in December 1997 under much publicity and with broad support from the Palestinian population. The preliminary results from the census show that the Palestinian population at the end of 1997 stood at 2.89 million people. Of this total, 1.46 million (50.8 percent) are males and 1.42 million (49.2 percent) are females. The data also shows that at the end of 1997, 1.6 million (57 percent) Palestinians lived in the West Bank (excluding East Jerusalem), 1.0 million (36 percent) lived in the Gaza Strip and an estimated 210,000 (7 percent) Palestinians lived in East Jerusalem.
The numbers confirm an expected high urbanization rate in the Palestinian economy. About 54 percent of the population lives in urban areas, not counting the 16 percent of the population living in refugee camps, typically also located in urban areas. Only 30 percent of the population lives in rural areas. The census shows that at the end of 1997 there were almost 407,000 households in the West Bank and Gaza. This works out to an average household size of 6.4 persons. Simultaneously with the population census, the PCBS also undertook a census of economic establishments and enterprises operating in the Palestinian economy. This shows that at the end of 1997, there were more than 76,700 establishments operating in the private sector (excluding establishments in East Jerusalem). The number of persons engaged by these establishments totaled over 190,000 people. This brings the average persons per establishment to 2.5, which illustrates the smallĀ¬-scale nature of the Palestinian private sector.

National Accounts

The PCBS has now released preliminary national accounts for 1995 and 1996. These show that the value of the gross national product (CNP) (which equals gross domestic product [COP] plus net factor income from abroad) comes to NIS 14,330 million ($4,509 million) for 1996. The net factor income from abroad equals $525 million as wage income from Palestinian workers primarily in Israel and $87 million as net property income from abroad. The value of COP for 1996 comes to NIS 12,383 million ($3,897 million) when measured at current market prices. After deducting all net indirect taxes, we get the current value of COP at factor cost which comes to NIS 10,602 million (NIS 3.65 equal $1) for 1996.
COP at factor cost is the appropriate base to use when analyzing the composition of COP from the production side. Doing so, we see that in 1996 private services (including trade, rental services and transportation) contributed 38 percent of value added to the Palestinian economy. This is followed by public and community services (NCOs, central and local government) which contributed 23 percent of value added. Next comes industry (manufacturing, quarrying, and the supply of utilities) which added 16 percent to value added in the year. Agriculture and fishing contributed 14 percent to value added and, finally, 9 percent of value added came from activities in the construction sector.
Another way of analyzing the national accounts is from the expenditure side. If total consumption and investment is larger than GDP, the excess absorption will lead to a resource gap. In other words, more resources are used than are available from domestic production. This is the situation with the Palestinian economy where, in 1996, total consumption (including private and public) amounted to NIS 15,923 million (129 percent of COP) and gross domestic investment (including private and public as well as changes in inventories) amounted to NIS 3,742 million (30 percent of COP). The excess absorption is reflected in a resource gap of NIS 6,188 million (50 percent of GDP) when disregarding net errors and omissions. When comparing 1996 with 1995, we see a slight increase in the relative share of consumption resulting in a relatively higher resource gap.
Based on the national accounts and the size of the population for 1996/ estimated using the new census results, we can derive per capita income measures for that year. These show that in 1996, the average CNP per capita for the West Bank and Gaza came to $1,700 and COP per capita came to $1,470. At $1,855, GNP per capita was higher in the West Bank than in the Gaza Strip where it came to $1,410. The same goes for GDP per capita which, in the West Bank was $1,580 whereas, it came to $1,275 in the Gaza Strip.

Real Economy

The estimates reveal an economy operating under stress. There is no doubt, though, that with a more favorable external environment and less adverse political developments the economy would have performed much better. The estimates indicate that real GDP grew by 10 percent in 1994 but then declined by 6 percent in 1995. This was followed by no growth in 1996. The same growth pattern can be found for the GNP, which in real terms grew by 8 percent in 1994, followed by a decline of 5 percent in 1995. In 1996, real GNP fell by 1 percent.
In addition to politically related external constraints, the very high population growth rates also put pressure on the economy. Unless annual real growth rates of at least 5-6 percent are realized, the real income per capita in the Palestinian economy will shrink. This is what happened during 1994-1996 when the poor economic record and the high population growth resulted in declining real income per capita. In 1994, real GDP per capita grew by 4 percent, but the following year it dropped by 12 percent. In 1996 the economic stagnation and the population growth again led to a fall in real GDP per capita, this time by 6 percent. The same picture emerges for real GNP per capita. In 1994 this grew by 2 percent, followed by a substantial drop of 10 percent in 1995. The economic stagnation in 1996 led to a fall in real GNP per capita by 7 percent that year. If we look at the aggregate picture from 1994-1996, real GDP per capita fell by 14 percent, whereas real GNP per capita fell by 16 percent.


The PCBS has also recently released annual data on the consumer price index for 1997. This is the most commonly used indicator of inflation. The data shows that annual inflation in the Palestinian economy came to 7.6 percent in 1997. The inflation rate was higher in the Gaza Strip at 8.6 percent, followed by inflation in the remaining West Bank at 7.6 percent and, finally, in East Jerusalem at 7.3 percent.


The new national accounts show that the level of investment has been higher than most commentators have previously assumed. However, a very large share of this investment has been in residential buildings, which compared to investment in machinery and equipment, has a lesser impact in terms of increasing the productive capacity of the economy. The national accounts show that gross investment in nominal terms came to $1,179 million (28 percent of GNP) in 1995, going down slightly to $1,091 million (24 percent of GNP) in 1996. Using data from the PCBS, the World Bank estimates that in 1996 gross investment in residential buildings amounted to $638 million (14 percent of GNP), gross investment in non-residential buildings amounted to $159 million (3 percent of GNP) and gross investment in machinery and equipment amounted to $293 million (7 percent of GNP). This was slightly down from 1995 when gross investment in residential buildings amounted to $684 million (19 percent of GNP), gross investment in non-residential buildings amounted to $171 million (4 percent of GNP) and gross investment in equipment and machinery amounted to $324 million (8 percent of GNP).
The new investment data from the PCBS also provides a breakdown into private and public gross investment. This indicates that in 1996, $929 million (21 percent of GNP) of gross investment was in the private sector. The remaining $162 million (4 percent of GNP) was invested by the public sector, either at the level of the central or the local government. In 1995, $986 million (23 percent of GNP) of gross investment was in the private sector with the remaining $193 million (5 percent of GNP) in the public sector.

Excerpts from The World Bank Group quarterly publication The West Bank and Gaza Update, First Quarter 1998. <