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.
Population
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 small¬-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.
Inflation
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.
Investment
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.
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