ANNUAL REPORT JUNE 2010
FEDERATION OF EURO-ASIAN STOCK EXCHANGES
PALESTINE SECURITIES EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Political Developments
Government Reforms: The PNA has made
substantial progress towards improving its fiscal
position since 2007. In January 2010, the PNA
launched a plan of priority interventions for 2010
comprising 201 projects identified by PNA
ministries. They have a total estimated budget of
US$5.5bn. Projects for 2010 require US$667m.
Infrastructure projects account for 67% of the
requested funding and include: a railway network,
a commercial port, at least one international
airport, desalination plants and wastewater
treatment facilities. The contribution of major economic sectors to
GDP has varied little over the past year. In Q3
2009, public administration and defence
contributed 14% of value added, wholesale and
retail trade 10%, manufacturing 10%, transport
storage and communications 9%, real estate,
renting and businesses services 9%, agriculture
and fishing 3% and construction 6%.
The PNA has also focused on developing the
institutional and legal framework in recent years.
A priority has been the comprehensive reform of
the tax system. A new income tax law has been
adopted and the VAT rate has been reduced. Foreign Trade: has been severely hindered by
Israel’s control over Palestinian borders. Trade
indicators have recovered considerably since
2002. Israel is the main trading partner of the
Palestinians.
The Ministry of National Economy is making
efforts to develop public-private sector
partnership. Regulations in the Palestinian
financial markets are also continuing to improve,
with, for example, a new ‘Code of Corporate
Governance’ which private sector companies are
expected to follow. The PNA has concluded free trade agreements
with the European Union, the European Free
Trade Association (EFTA), the US, Canada and
Turkey.
Closure obstacles in the West Bank and Gaza
Strip numbered 619 in August 2009 (OCHA data).
The Gaza Strip is completely isolated with all
exists sealed. Two-thirds of the 723.3 km
separation wall between Israel and the Palestinian
Territories is complete complications in the
Palestinian territory.
Economic Developments
The Palestinian economy is robust in its capability
to function under often harsh conditions. Due to
the political situation, however, it has witnessed
many ups and downs over the years.
GDP growth averaged 6% per year between 1995
and 2000 (World Bank) but ground to a halt at the
Second Intifada. The Palestinian economy
rebounds when given the chance and with
improved movement and access, GDP forecasts
are very positive- the IMF reported that GDP in
the West Bank could increase by 7% in 2009.
Unfortunately, restrictions in 2009 did not
significantly improve so more modest growth is
expected.
CPI: Inflation in Palestine is comparable to rates
in Western countries and below the MENA region
average. It increased by 2.75% between 2008 and
2009.
Total imports were US$3.8bn in 2008 (up 20%
since 2007) and total exports were US$0.5bn (up
3% since 2007). 72% of imports came from Israel,
an increase of 20% since 2007. In 2008, exports
to Arab countries, US and EU increased by 38%,
35% and 25% respectively. There were noticeable
increases in the export levels of agricultural, food,
metal and plastics products.
The trade deficit in 2008 increased to US$3.2bn,
up 27% from 2007. The deficit is covered mainly
by external assistance and worker’s remittances.
Labour Force
Perhaps the greatest asset to the Palestinian
economy is its human resources. The level of
education is the highest in the region, with the
exception of Israel. There is well developed
entrepreneurial capacity, good language skills
and strong social and economic networks. Local
Palestinian demand and labour force are
expected to grow over the next decades as more
than half of the population is below the age of 18.
unemployment in the West Bank has been on a
downward trend over the past five years. The
unemployment rate for the Third quarter of the
year 2009 reached to 25.8% recorded an increase
by 16.2% compared with the Second quarter of
Key Information Contacts
Palestine Capital Market Authority: www.cma.gov.ps
Ministry of Finance: www.mof.gov.ps
Ministry of National Economy: www.met.gov.ps
Palestinian Investment Promotion Agency: www.pipa.gov.ps
Palestine Monetary Authority: www.pma-palestine.org
Palestinian Central Bureau of Statistics: www.pcbs.org.ps
Palestinian Economic Council for Development and Reconstruction: www.pecdar.org
Palestine Institute for Financial & Banking Studies: www.pifbs.com
Palestine Media Center: www.palestine-pmc.com
Custodian Bank - HSBC Bank Middle East: www.middleeast.hsbc.com
Settlement Bank - Arab Bank Palestine: www.arabbank.ps
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the year 2009. The unemployment rate recorded
an decrease by6.18% during the Third quarter
2009 compared with the similar quarter of the
previous year 2008. The unemployment rate for
the full year 2008 was 26.0% compared with
21.5% in 2007.
Impact of the economical situation on the PSE
Despite the political and economical
deteriorations, the PSE stands on solid ground,
as it is better on both directions; improving the
performance of the market, and improving the
investment environment in securities market,
which enables the PSE to achieve outstanding
results in 2009, as Al Quds Index increase by
11.62% compared to 2008.
During 2009 PSE held 246 trading sessions with
approximately 89 thousand transactions were
executed with a value that goes around US$ 500
million decreasing by 57.78% compared to 2008.
While Al-Quds Index was increased by 11.62
during the same period compared with 2008, all
indicators show that at any positive development
in the political situation in Palestine will be
reflected immediately in the economical
circumstances and the PSE.
Financial Crisis
The impact of the global financial crisis on the
Palestinian economy was fairly limited. Local
banks are conservative in regard to foreign
activities and the Palestinian mortgage market is
very small. The stock market was mildly affected
by foreign investors who became reluctant to
trade in the PSE. In 2008, the Al-Quds index
dropped 16%, which compared well with other
Arab markets. Since mid 2009, the Palestinian
index has been stable, (around the 500 mark) and
by the end of the year, had increased by
11.62%.*
* Information provided by PSE.