2016年-世界发展银行全球_Economic_Monitoring_Report_to_the_Ad_Hoc_Liaison_Committee_36页_1mb

Economic Monitoring Report Summary

Core Content

This report provides an overview of the economic situation in the Palestinian territories, focusing on recent developments in the real sector, public finance, and money and banking sectors. It highlights the challenges facing the Palestinian economy and the role of donors, the Palestinian Authority (PA), and the Government of Israel (GoI) in addressing these issues. The report emphasizes the need for continued donor support, sustained reforms, and improved coordination to ensure fiscal sustainability and long-term economic recovery, particularly in Gaza.

Main Points

1. Economic Outlook and Growth

• The Palestinian economy is recovering slowly from the 2014 recession, with per capita income growth nearly stagnant.
• Projected real GDP growth for 2016 is 3.3 percent overall, with 2.7 percent in the West Bank and 5.5 percent in Gaza.
• Medium-term growth is expected to remain around 3.5 percent, which is insufficient to improve living standards given the high population growth.
• The economy has not created enough jobs, leading to persistent unemployment rates of 27 percent in 2016 (18 percent in the West Bank, 42 percent in Gaza).
• Youth unemployment remains a critical issue, especially in Gaza.
• Inflation remains low, aligned with Israeli price trends, but subdued due to deflation and falling global fuel and food prices.

2. Fiscal Situation

• Despite fiscal consolidation efforts, the PA's fiscal situation remains fragile with a projected 2016 financing gap of over US$600 million.
• The PA reduced its fiscal deficit by 15 percentage points of GDP over the last decade, a significant achievement.
• In the first half of 2016, the total deficit was US$542 million, with aid support at US$337 million (28 percent less than 2015).
• Budget support decreased from US$287 million in 2015 to US$50 million in 2016, while development financing also dropped.
• The financing gap is growing, with limited alternatives to address it, particularly as the PA approaches the borrowing limit set by the Palestine Monetary Authority (PMA).

3. Public Expenditure and Revenue

• Public expenditure in the first half of 2016 grew by 8 percent, exceeding the prorated budget target.
• Wage bill increased by 5 percent, driven by unbudgeted salary increases for teachers, vets, and engineers.
• Non-wage expenditure grew by 14 percent, mainly due to increased medical referrals.
• The PA's total deficit is projected to reach US$1.3 billion in 2016, or 10 percent of GDP.
• Revenue growth was supported by frontloaded domestic taxes and one-off transfers from the GoI, especially through Allenby Bridge exit fees and VAT refunds.

4. Donor Support and Financing Gap

• Donor support for the PA in 2016 is expected to be under US$700 million, down from US$2 billion in 2008.
• The financing gap is projected to be over US$600 million in 2016, forcing the PA to rely on domestic arrears and private suppliers.
• The PA has introduced a promissory notes program, which has already been discounted by local banks.

5. Banking Sector Stability

• The Palestinian banking system is stable and liquid, with total credits and deposits growing steadily.
• Net assets increased by 11.7 percent to US$13.3 billion, and direct credit grew by approximately US$1 billion.
• The credit-to-deposits ratio remains at 63 percent, indicating a high level of liquidity.
• The banking sector is exposed to significant risks due to its reliance on the public sector, with government loans accounting for one quarter of total lending.
• PA debt is equivalent to 96 percent of the banking sector's total owners' equity, highlighting the credit concentration risk.
• The promissory notes program has increased the banking sector's exposure to the PA.

6. Economic Development and Business Climate

• The business climate in the Palestinian territories is poor, with the country ranking 129th out of 189 in the World Bank's 2016 Doing Business report.
• Restrictions on trade and access to resources have severely limited private investment and economic competitiveness.
• The World Bank recommends improving the business climate, particularly in Area C, where restrictions are most detrimental to economic growth.
• The lifting of restrictions in Area C could increase Palestinian GDP by more than a third and employment by 35 percent.

7. Gaza Reconstruction and Recovery

• The Gaza Reconstruction Mechanism (GRM) has been effective in facilitating material for minor home repairs and increasing transparency.
• However, more complex infrastructure projects face long delays due to restrictions on material and equipment.
• Out of US$3.5 billion pledged at the Cairo Conference, 46 percent has been disbursed, with an additional US$188 million disbursed since the last AHLC meeting.
• The total disbursement is still US$1.3 billion behind the planned amount.
• Donor disbursements need to accelerate, and the current import mechanism must be adjusted to support long-term recovery projects.

Key Recommendations

• Donor Support: Increased donor support, especially budget support, is crucial to address the financing gap and prevent a fiscal crisis.
• PA Reforms: The PA must continue to implement reforms to improve tax enforcement, reduce non-priority spending, and optimize one-off revenues.
• GoI Actions: The GoI should support the PA by reducing fiscal losses under the Paris Protocol and facilitating access to resources in Area C.
• Fiscal Sustainability: A prudent and stringent fiscal consolidation program is necessary for long-term sustainability, including reforming the pension system and civil service.
• Banking Sector: The banking sector needs to streamline administrative processes and improve coordination with the PA and Israeli authorities to reduce risks.
• Gaza Recovery: Accelerated donor disbursements and a more efficient import mechanism are essential for long-term recovery in Gaza.