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Economic Forecasts for 2015

2014-12-30

These forecasts were developed on the basis of various scenarios for Palestine, which does not separate between the West Bank and the Gaza Strip despite the gap between both of them, and in consultation with local economists, the Ministry of Finance and the Palestinian Monetary Authority.  Each scenario took into consideration internal political and economic circumstances for 2015, the block imposed on the Gaza Strip, foreign aid, Israeli measures in Palestine, the number of Palestinian workers in Israel, and economic and social variables.

 

1.       Base Scenario

 

This scenario is based on the assumption that the economic and political situation in Palestine will remain the same as it was during 2014. It assumes that donor countries will continue to provide financial support for the budget of the State of Palestine (central government) at the same level as in 2014, and that the transfer of money generated from clearance revenues via Israel continues. It also assumes that there will be an improvement in the collection of taxes to increase income tax revenues, plus local value added tax, and clearance value added tax by 4.0% for each them . It is assumed that the number of public sector employees remains constant and that government transfers increase by 4.0% compared with 2014, along with increases in development expenditure. It is assumed that obstacles placed by Israel on the movement of people and goods inside Palestine, between regions, or with neighboring countries, will be the same as in 2014, in addition to natural population growth in Palestine.

 

Expectations of Base Scenario

                                        

Real Sector:

Gross Domestic Product (GDP): It is anticipated that this will increase by 2.8% in 2015, the value of GDP per capita will decrease by 0.2%, and the value of gross consumption (private and public) will decrease by 1.4%.  The value of total investment is expected to increase by 7.1%.

                     

Work and Workers: An increase of 4.4% in the number of employees in Palestine is anticipated and the unemployment rate 2015 is expected to reach 27.9% in 2015.

 

Fiscal Sector:

An increase in the value of government revenues of 0.7% is anticipated as a result of improvements in tax collection, an increase in the value of government expenses by 1.8%, and an increase of 3.5% in the value of the public budget deficit (central government).

 

External Sector:

A decrease of 24.1% is anticipated in the net current account[1] deficit value of Palestine and a decrease of 6.9% in the trade balance deficit value. The value of Palestinian imports is expected to decreased by 3.7%, while the value of Palestinian exports is expected to increase by 2.9%.  Increases are also anticipated in net factor income value by 22.8%, in gross national income value by 4.4%, and in gross national disposable income value by 4.5%.

 

2.        Optimistic Scenario

 

This scenario is based on an improved political and economic situation due to greater reconciliation between the West Bank and Gaza Strip, the reconstruction of the Gaza Strip, and assistance provided by donor countries to finance the budget of the State of Palestine (central government) of twice that of 2014. It assumes the continuation of transfer clearance revenues and improved tax collection efficiency, an increase of income tax revenues, local value added tax, and clearance value added tax by 6.0%, 15.0% and 10.0% respectively, an increase in development expenditure of 175.0%, increased government transfers of 16.0%, and the accommodation of 45 to 50 thousand employees in the Gaza Strip in the public sector.  It also assumes that obstacles placed by Israel on the movement of people and goods inside Palestine, between regions, or with neighboring countries reduced compared with 2014, plus natural population growth in Palestine.

 

 

Expectations of the Optimistic Scenario

 

Real Sector:

Gross Domestic Product (GDP): It is anticipated that this will increase by 7.1% during 2015 and GDP per capita will increase by 3.9%. It also assumes that gross consumption value (private and public) will increase by 0.5% and the value of total investments will increase by 27.6%.

                     

Work and Workers: An increase of 8.1% in the number of employees in Palestine is anticipated and the unemployment rate is expected to decrease slightly during 2015 to 26.3%.

                           

Fiscal Sector:

An increase in the value of government revenues of 13.0% is anticipated, plus an increase in the value of government expenses of 19.0%, and an increase in the public budget deficit value (central government) of 29.0%.

 

External Sector:

A decrease of 34.0% in the net current account deficit value of Palestine is anticipated and an increase of 1.2% in the trade balance deficit value, increasing the value of Palestinian imports by 2.9%.  The value of net factor income is expected to increase by 40.2%, reflecting directly on the net current account deficit value due to the increasing number of workers in Israel as a result of the assumption of freedom of movement of people and goods in Palestine. This would increase gross national income value by 9.7% and gross national disposable income value by 12.5%.

 

 

3.          Pessimistic Scenario   

This scenario is based on deterioration in the political and economic situation and in reconciliation between the West Bank and the Gaza Strip. It assumes reduced aid from donor countries to finance the budget of the State of Palestine (central government), an increase in tax evasion, fluctuations in the transfer of clearance revenues, and also a decline in revenues of the local value added tax and clearance value added tax of 30.0% for each them. It assumes that obstacles placed by Israel on the movement of people and goods inside Palestine, between regions, or with neighboring countries will increase and the number of workers in Israel will decrease as the result of closures and a halt to negotiations.

 

Expectations of the Pessimistic Scenario

 

Real Sector:

Gross Domestic Product (GDP): This is anticipated to decrease by 3.7% during 2015 and GDP per capita will decrease by 6.6%.  In addition, gross consumption value (private and public) will be reduced by 3.9% and the value of total investments will decrease by 1.5%.

                     

Work and Workers: The number of employees in Palestine is anticipated to decrease by 1.9% and the unemployment rate is expected to increase to 30.2% during 2015.

                           

Fiscal Sector:

Government revenues value are anticipated to decrease by 13.9% as a result of Israel freezing a proportion of tax revenues, plus an increase in tax evasion, a decrease in the value of government expenses of 4.5%, and an increase in the public budget deficit value (central government) of 11.4%.

 

External Sector:

The net current account deficit value of Palestine is anticipated to increase by 9.0%, while a decrease of 2.8% in the trade balance deficit value is anticipated as a result of a decrease in the value of Palestinian imports of 3.3%.  Net factor income value will decrease by 7.5% as a result of the assumption that the number of workers in Israel will decrease and constraints imposed within Palestine will increase. A decrease of 4.0% is anticipated in gross national income value and of 5.7% in the value of gross national disposable income.

 


 

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