Economic Developments Q4 2024

Research and Monetary Policy Department
First Quarter, 2024

Economic Developments Report

Fourth Quarter, 2024

Research and Monetary Policy Department
April 2025

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© April, 2025
All rights reserved.
In case of citation, please refer to this publication as follows:
Palestinian Monetary Authority, Economic Developments Report - Fourth Quarter 2024.

All correspondence should be addressed to:
Palestinian Monetary Authority
P.O. Box 452
Ramallah and Al-Bireh - Palestine
Tel: (+970) 2-241-5251
Fax: (+970) 2-241-5310
Email: info@pma.ps
Website: www.pma.ps

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Executive Summary
The ongoing Israeli aggression since the first quarter of 2023 has led to a noticeable decline in the performance of all economic activities and sectors in Palestine, especially in the Gaza Strip. The fourth quarter of 2024 witnessed the continuation of unprecedented high price levels, rising unemployment rates, in addition to a decline in purchasing power. All of this led to a decline in private consumption, the main driver of the Palestinian economy.

Below is a summary of the most important economic indicators during this quarter:

• Real Gross Domestic Product (GDP) declined by 0.9% on an annual basis.
  o West Bank economy grew by 1.1%. o Gaza Strip economy declined by 41.2%.
• Inflation rate rose to approximately 82.6% on an annual basis.
  o 1.1% in the West Bank. o 324.8% in the Gaza Strip.
• Unemployment rate rose to 46.5% in Palestine, compared to its corresponding level last year.
  o 28.8% in the West Bank. o 79% in the Gaza Strip.
• Government revenues declined while expenditures rose, and the general government debt balance rose to approximately 30.7% of GDP.
• Performance of all current account items improved, and the current account deficit declined to less than half of its corresponding level, accounting for approximately 13.0% of GDP.

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Contents
Executive Summary .................................................................................................... iii
Global and Regional Developments 1.......................................................................................
Local Developments 4.....................................................................................................
Growth and Expenditure 4........................................................................................................
Prices and Inflation 7....................................................................................................
Labor Market 8...........................................................................................................
Public Finance 10........................................................................................................
External Sector 11....................................................................................................
Banking Developments 12...............................................................................................
Palestine Exchange 13....................................................................................................

1
Global and Regional Developments
Growth in the global economy during the fourth quarter of 2024 was affected by a group of factors and challenges, the most important of which were the continued rise in inflation rates, geopolitical tensions, climate changes, in addition to major developments in the field of artificial intelligence and technology and innovation. The impact of these factors and challenges varied on the performance of advanced economies and emerging and developing economies. Emerging economies showed greater resilience in facing such challenges, making them the focus of investors' attention. Advanced economies, which still suffer from these challenges, have been pushed to maintain tight monetary policies aimed at combating high inflation levels.

Expectations issued by the statistics website (1) indicate a noticeable variation in (expected) growth rates among the group of advanced countries and the group of emerging and developing countries during the fourth quarter of 2024, and at the level of countries within the same group.

These expectations showed a slowdown in growth in advanced economies to approximately 1% during the fourth quarter of 2024 on an annual basis, due to the impact of these economies on rising production costs, in addition to tight monetary policies.

On the other hand, growth in emerging and developing economies is expected to accelerate to approximately 4.8% during the same period, due to improved foreign investments and increased industrial activity in these countries, which led to increased local demand and improved production levels.

Within the group of advanced economies, growth continued to slow in the US economy during the fourth quarter of 2024 to reach approximately 2.5%, after growing by approximately 2.7% during the previous quarter. The performance of the US economy during this quarter was affected by political developments and the presidential elections, which resulted in a new administration with a completely different approach, especially regarding the threat of imposing customs duties on many imported goods, which led to a loss of momentum and increased uncertainty. Despite this slowdown, the US economy still records strong consumption and export performance, especially car sales. This prompted the Federal Reserve to maintain the interest rate unchanged, to face inflation levels that are still higher than their targeted levels.

On the other hand, the Eurozone economy grew during the fourth quarter of 2024 by approximately 1.2% on an annual basis, compared to approximately 0.9% during the previous quarter. This growth was driven by improved household consumption, against the backdrop of declining inflationary pressures and lowering official interest rates and investment rates, leading to a decrease in borrowing costs. Spain and the Netherlands were considered the main drivers of growth in the Eurozone, as the first achieved growth of approximately 3.5% on an annual basis, thanks to improved exports and household consumption and supported by the tourism sector, while the second grew by approximately 1.8% on an annual basis, against the backdrop of increased household consumption, improved exports especially industrial ones and gas and electricity exports, in addition to the noticeable improvement in the automotive sector.

On the other hand, during the fourth quarter of 2024, the weak performance of the German economy continued, contracting by approximately 0.2% compared to the corresponding quarter. This decline came against the backdrop of external competition and rising energy costs, which led to a decline in goods and services exports, and consequently a decrease in production in the automotive and machinery sectors.

As for the economies of emerging and developing countries, the Chinese economy continued to improve and achieved a higher-than-expected growth rate, as it grew during the fourth quarter of 2024 by approximately 5.4% on an annual basis, compared to approximately 4.6% during the previous quarter. This growth is attributed to the necessary stimulus and investment plan adopted by Beijing in early September 2024, aimed at pushing the economy forward, through improved exports and industry. It appears that the plan is bearing fruit, despite existing challenges under the shadow of fears of a trade war and the imposition of customs duties, weak local demand, and weak retail sales.

On the other hand, the Turkish economy achieved growth of approximately 3.0% during the fourth quarter of 2024 on an annual basis, compared to approximately 2.2% in the previous quarter. This growth came as a result of improved household spending and improvement in the construction sector during this quarter. The Central Bank's policies also contributed to growth, through monetary easing policies that significantly lowered official interest rates, encouraging investment and consumption, and consequently reducing borrowing costs.

On the regional level, the Israeli economy began to recover from the effects of the war on the Gaza Strip, achieving growth of approximately 5.5% during the fourth quarter of 2024 compared to a decline of approximately 1.3% in the previous quarter. This growth came under the shadow of the ceasefire agreement with Lebanon and improved private consumption, specifically car sales. Government spending also witnessed a noticeable increase during this quarter to cover war expenses on the Gaza Strip. In contrast, the construction and agriculture sectors and the technology sector were significantly affected by the war and labor shortages. The unemployment rate in the Israeli economy continued to decline to approximately 2.6% during the fourth quarter of 2024 compared to approximately 2.7% in the previous quarter, against the backdrop of the continued enlistment of large numbers in mandatory military service.

On the other hand, data issued by the Bank of Israel showed stability in the inflation rate during the same fourth quarter of 2024 at a level of 3.4% on an annual basis, the same rate as the previous quarter, exceeding the targeted levels (1%-3%). The Bank of Israel maintained the official interest rate at the same level as the previous quarter, stabilizing at a level of 4.50%.

As for the Jordanian economy, it is expected to grow during the fourth quarter of 2024 by approximately 2.9% on an annual basis, compared to 2.6% in the previous quarter. It is expected that most economic activities will continue to grow, especially productive ones. It is expected that opening some crossings with Syria during this quarter will contribute to increasing trade exchange movements, in addition to tax exemptions and settlements. Government measures aimed at supporting the private sector and stimulating the economy and lowering official interest rates have also contributed. The unemployment rate stabilized at approximately 21.4%, as in the previous quarters of 2024. This quarter also witnessed a decline in the inflation rate to 1.3% compared to approximately 1.6% in the previous quarter. On the other hand, the Central Bank of Jordan lowered the official interest rate during the fourth quarter of 2024 to reach 6.5% at the end of the quarter, compared to 7% at the end of the previous quarter.

(1) https://ehsaeyat.com /
Figure 1: Growth Rates (%)
Source: https://tradingeconomics.com
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0
2
4
6
8
10
America
Eurozone
Japan
Britain
China
Turkey
India
Percentage
Q4 2023 Q3 2024 Q4 2024

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4
Local Developments
Growth and Expenditure
Real Gross Domestic Product (GDP) declined during the fourth quarter of 2024 by approximately 0.9% compared to the corresponding quarter of the previous year (compared to growth of approximately 1.5% on an annual basis), reaching approximately 2.9 billion US dollars. This decline came under the shadow of the unprecedented continuation of Israeli aggression on various Palestinian areas, especially the Gaza Strip, which led to a noticeable decline in all economic indicators, especially private consumption.

On the geographical level, real GDP in the West Bank achieved growth for the first time in a year, by 1.1% compared to the corresponding quarter, and approximately 2.0% on a quarterly basis, reaching approximately 2.8 billion US dollars. This was against the backdrop of improved activities in agriculture, industry, and wholesale and retail trade during this quarter, in addition to the noticeable improvement in public administration and defense activities. In the Gaza Strip, the economic and social crisis continued, as a result of Israeli aggression and the near-total destruction of infrastructure and production units, as real GDP declined by 41.2% on an annual basis, and approximately 11.6% on a quarterly basis, reaching approximately 80.3 million US dollars.

This quarter witnessed a divergence in the components of aggregate demand in Palestine, as private consumption declined by 11.0% on an annual basis (and by 6.6% on a quarterly basis), reaching approximately 2.4 billion US dollars, due to its decline in the West Bank by 9.4% (5.8%) and in the Gaza Strip by 42.5% (25.2%). On the other hand, government consumption witnessed an increase of approximately 17.9% during this quarter, reaching approximately 666.7 million US dollars, as it rose in the West Bank by 19.5% and in the Gaza Strip by 5.9%.

Figure 2: Growth Rates in Palestine (Annual Basis)
Source: Quarterly National Accounts, Palestinian Central Bureau of Statistics, 2025 -100 -80 -60 -40 -20 0 20 Q4 2023 Q1 2024 Q4 2024 Percentage Gaza Strip West Bank Palestine

Also, the state of uncertainty and security tensions continued to cause a decline in investment expenditure during this quarter by 7.4% compared to the corresponding quarter, reaching approximately 748 million US dollars, as it declined in the West Bank by 6.8%, while it declined to almost zero in the Gaza Strip. Under the shadow of these developments, it is expected that the Israeli labor market will continue to be closed to Palestinian labor, and the continuous deductions from clearance funds, and weak international grants and aid, in addition to long delays in paying public sector employees' salaries. All these factors contributed to a decline in purchasing power, in addition to individuals' reluctance to consume or invest.

It is worth noting that the decline in private consumption was reflected directly in the volume of imports, as most consumption is covered through imports. The volume of imports declined during the fourth quarter of 2024 by 9.6% on an annual basis, reaching approximately 1.6 billion US dollars. On the other hand, Palestinian exports witnessed an increase of approximately 13.6% on an annual basis during this quarter, reaching approximately 646.6 million US dollars. The decline in private consumption is considered the main driver of the Palestinian economy, in contrast to the improvement in exports and government spending.

In light of the aforementioned developments, per capita real GDP in Palestine declined by 2.8% compared to its level a year ago, reaching approximately 538.7 US dollars. It declined by 1.0% in the West Bank, reaching 915.1 US dollars, while it declined by 42.0% in the Gaza Strip to approximately 35.5 US dollars during the same period.

Figure 3: Growth Determinants
Source: Calculated by the researcher based on data from the Palestinian Central Bureau of Statistics, 2025

Figure 4: Per Capita Real GDP
Source: Quarterly National Accounts, Palestinian Central Bureau of Statistics, 2025 -75 -50 -25 0 25 Q4 Q1 Q2 Q3 Q4 2023 2024 Investment General Consumption Private Consumption Exports Net Growth 0 300 600 900 1200 Quarter First Second Third Fourth First Second Third Fourth 2023 2024 Gaza Strip West Bank Palestine

On the supply side, the performance of economic activities in Palestine during the fourth quarter of 2024 varied, as the performance of some activities such as agriculture, industry, and wholesale and retail trade improved, while some others declined, such as construction and services, and others remained stable as they were a year ago, such as transport and storage. Data indicates a noticeable decline in the performance of all economic activities in the Gaza Strip, without exception, due to the continuous destruction that the Gaza economy has witnessed since the first quarter of 2023 as a result of Israeli aggression.

On the other hand, the performance of economic activities in the West Bank varied, as the performance of agriculture and trade activities improved by 16.9% and 4.7% on an annual basis, respectively, against the backdrop of a decline in the performance of construction and services activities by 13.9% and 8.8% during the same period.

Figure 5: Growth Rate by Economic Activity and Geographic Distribution, Fourth Quarter 2024 (Annual Basis)
Source: Quarterly National Accounts, Palestinian Central Bureau of Statistics, 2025 Gaza Strip, -41.2% -63.6% -72.7% -23.1% -21.6% -58.1% -66.7% 0.0% -26.9% -61.6% -100.0% -100% -80% -60% -40% -20% 0% West Bank, 1.1% -13.9% 3.9% -8.8% 2.2% -3.2% -4.9% 1.3% 4.7% 11.0% 16.9% -20% -10% 0% 10% 20%

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Prices and Inflation
The level of prices of goods and services in the Palestinian economy was significantly and noticeably affected by Israeli aggression in the West Bank. The impact of this aggression was greater on the price level in the Gaza Strip, as the inflation rate in the Gaza Strip during the fourth quarter of 2024 reached unprecedented levels of 324.8% as a result of the Israeli occupation preventing the entry of basic and primary goods to the sector, especially the northern part of the Gaza Strip. On the level of the West Bank, the inflation rate reached approximately 1.1% during the same period.

As a result of these developments, the inflation rate at the level of Palestine rose to approximately 82.6% during the fourth quarter of 2024 on an annual basis.

Price levels of goods and services varied according to the main groups in the Palestinian consumer basket (as is the case at the level of the Gaza Strip and the West Bank). Data issued by the Palestinian Central Bureau of Statistics showed an unprecedented rise in prices in the tobacco and cigarettes group by 796.9% on an annual basis (approximately 3,203.6% in the Gaza Strip and 6.3% in the West Bank). Food prices also rose by 104.3% compared to their levels during the corresponding quarter of 2023, as they rose by 350.0% in the Gaza Strip, while they remained stable at their corresponding levels in the West Bank (a slight rise of 0.4%). Prices in the housing and its supplies group rose by 32.3% compared to their level a year ago (approximately 103.1% in the Gaza Strip and approximately 0.5% in the West Bank). Medical goods and services prices also rose by 23.1% (approximately 89.2% in the Gaza Strip and 1.3% in the West Bank).

This quarter also witnessed a rise in the price level in the groups of textiles and clothing, transport and communications, and furniture and household goods by 17.7%, 15.9%, and 9.1%, respectively.

As for the price level in other groups, it varied between a rise of 5.8% in the personal services and protection group, and a decline of 1.1% in the communications group, during the same period.

Figure 6: Inflation Rate in Palestine
Source: Palestinian Central Bureau of Statistics, 2025 0 50 100 150 200 250 300 350 Q1 Q4 Q4 Q3 Q2 2023 2024 Percentage Gaza Strip (West Bank) Palestine

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Labor Market
The Palestinian labor market has continued to be affected by Israeli aggression on Palestinian areas since the first quarter of 2023. Data issued by the Palestinian Central Bureau of Statistics indicates the worsening of the Palestinian economy's suffering and the decline of all its economic and social indicators as a result of this aggression. This suffering was reflected in the Palestinian labor market, which was represented by the prevention of Palestinian labor from entering the Israeli labor market, which led to a deterioration in labor market indicators and a noticeable rise in unemployment rates.

Available data indicates that the number of workers in the West Bank reached approximately 716 thousand workers during the fourth quarter of 2024, compared to approximately 860 thousand workers before Israeli aggression. The number of Palestinian workers in the Israeli labor market declined to approximately 35 thousand workers (or approximately 4.9% of labor in the West Bank) during this quarter, compared to approximately 177 thousand workers (approximately 20.4% of labor in the local market) before the war. Workers were distributed as follows: approximately 17.9% in the public sector, local authorities, and the private sector, while approximately 74.2% worked in the Israeli labor market during the fourth quarter of 2024.

The services activity held the largest share of the number of workers during this quarter, with approximately 34.9% of them, while the trade and restaurants activity absorbed approximately 25.5% of workers in the local market, and approximately 14.8% of workers contributed to the industry and mining activity, and the construction and building activity employed approximately 11.8% of workers during the fourth quarter of 2024. As for Palestinian workers in the Israeli labor market, most of them concentrate in the construction and building activity (37.3%) and the industry and mining activity (35.4%).

The unemployment rate in the West Bank declined during the fourth quarter of 2024 to approximately 28.8%, compared to the previous and corresponding quarter, but it is still more than double what it was before the war. According to published data, the number of unemployed in the West Bank reached approximately 290 thousand people during the fourth quarter of 2024.

It is worth noting that data on the labor market in the Gaza Strip is not available in this report due to the Israeli aggression.

Data shows that the unemployment rate in the West Bank is close between males (29.1%) and females (27.7%), but this rate varies noticeably when taking years of study into account. Data indicates that the unemployment rate rises to 31% for males who have 1-12 years of study, while this rate drops to approximately 18.8% for males who have 13 years of study or more. On the contrary, the unemployment rate for females rises noticeably to reach 33.5% for women who have 13 years of study or more, compared to a rate of less than 10% for women who have less than 12 years of study.

As for the Gaza Strip, with the continuation of Israeli aggression and the destruction of infrastructure and the stoppage of most economic activities, most of the Gazan population has turned to unemployment, except for those people who work in the public sector, some international institutions, and some private sector institutions that still provide some services despite the aggression conditions, in addition to some street vendors, stall sellers, and other small businesses.

As for the average daily wage in the West Bank, it declined during the fourth quarter of 2024 by 5.8% compared to the corresponding quarter, and by 5.8% compared to the previous quarter, while it remained stable at 134.1 NIS/day. It is worth noting that the average wage of workers in the private sector reached approximately 131.0 NIS/day, compared to approximately 129.1 NIS/day for workers in the public sector. The average daily wage for Palestinian workers in the Israeli labor market reached approximately 238.0 NIS/day during the same period.

The transport and storage activity had the highest average daily wage in the local market during the fourth quarter of 2024, at approximately 193.6 NIS/day, followed by the construction and building activity at approximately 146.6 NIS/day, while the agriculture activity had the lowest wage at 90.1 NIS/day. On the other hand, the average daily wage for Palestinian workers in Israel ranged between below approximately 117.7 NIS/day in the agriculture activity and above approximately 312.5 NIS/day in the construction and building activity during the same quarter.

Figure 7: Unemployment Rate in Palestine
Source: Palestinian Central Bureau of Statistics, 2025 0 20 40 60 80 100 Q1 Q4 Q4 Q3 Q2 2023 2024 Percentage Gaza Strip West Bank Palestine

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Public Finance
The fourth quarter of 2024 witnessed a noticeable increase in the volume of grants and external aid, against a decline in clearance revenues, which led in total to an increase in total public revenues and grants (on a cash basis) by 23.3% compared to the corresponding quarter, according to Ministry of Finance data, reaching approximately 4.2 billion NIS. The volume of grants and external aid doubled during this quarter, reaching approximately 1.3 billion NIS compared to less than half a billion during the corresponding quarter. Local tax revenues also rose by 23.4% during this quarter to 1.2 billion NIS, despite being below their pre-war levels. On the other hand, clearance revenues declined by 13.2% during the same period, reaching approximately 1.7 billion NIS, with the amount due from these revenues reaching approximately 2.7 billion NIS.

The availability of liquidity among the government contributed to increasing its ability to meet its obligations during this quarter. Public expenditures increased on a cash basis by 11.4% during the fourth quarter of 2024 compared to the corresponding quarter, reaching 4.5 billion NIS, with the wage and salary bill accounting for approximately 40.1% of it, while non-wage expenditures accounted for approximately 45.2%.

Figure 8: Total Public Revenues and Grants (Million NIS)*

• Does not include refunds.
  Source: Palestinian Ministry of Finance, 2025
  0
  1,000
  2,000
  3,000
  4,000
  5,000
  Q1 Q4
  Q4 Q3 Q2
  2023 2024
  Grants and Aid Local Tax Revenues Clearance Revenues

Figure 9: Public Expenditure on a Cash Basis (Million NIS)

• Includes net lending and allocated payments.
  Source: Palestinian Ministry of Finance, 2025
  0
  1,000
  2,000
  3,000
  4,000
  5,000
  Q1 Q4
  Q4 Q3 Q2
  2023 2024
  Development Expenditures Non-Wage Expenditures * Wages and Salaries

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Despite the improvement in liquidity, the general government debt (specifically domestic debt) continued to rise by approximately 11.2% on an annual basis, reaching approximately 4.2 billion US dollars at the end of the fourth quarter of 2024, accounting for approximately 30.7% of GDP. This rise is mainly due to an increase in domestic debt by 17.1% during the same period, reaching approximately 2.9 billion US dollars.

External Sector
The current account deficit in Palestine declined during the fourth quarter of 2024 to less than half of the previous and corresponding quarter, reaching approximately 480 million US dollars, which accounts for approximately 13.0% of GDP during the same quarter. This improvement came as a result of an increase in both net income from Israel (increased compensation for Palestinian workers in Israeli government) and an increase in current transfers (transfers to the Palestinian population). Net income from Israel during this quarter doubled compared to the corresponding quarter, reaching approximately...