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Research studies

Level of Fragility of Palestinian Society and the Role of Stability and Elasticity of the Palestinian Economy to Reduce this Fragility Level

Prepared by the researcher  – Maen Ahmed Salhab MA in Sustainable Development – Researcher in Sustainable Development in Fragile Society – Statistician in socio-economic, Palestinian Central Bureau of Statistics

Democratic Arab Center

Journal of Afro-Asian Studies : Sixth issue – July 2020

A Periodical International Journal published by the “Democratic Arab Center” Germany – Berlin. The journal deals with the field of Afro-Asian strategic, political and economic studies

Nationales ISSN-Zentrum für Deutschland
ISSN 2628-6475
Journal of Afro-Asian Studies
 :To download the pdf version of the research papers, please visit the following link

Abstract

Palestinian society has been shocked several times during the last hundred years, the fragility was a main outcome of these situations. Precisely and thoroughly measure of this phenomenon is the first necessary step to be taken to reduce their effect.Therefore, the purpose of this paper is to measuring level of stability and elasticity of the Palestinian economy and its impact on the level of fragility of the Palestinian society and to identifying the elements and requirements of economic development needed to reduce fragility. By achieving this, the researcher used two types of descriptive approaches. The first is the survey, where Economists (Palestinian university professors and Economists in Palestinian research centers) evaluated level of economic stability and fragility through a special tool. The second type is a correlation and a time series data which used for statistical data from official institutions and research centers. The results showed that according to FSI  model, the level of fragility of Palestinian society during the last decade was 86.2[1] and it was 86.4 in 2018, and this level describes in FSI scale as a high warning level. there was a fluctuation in the level of fragility in Palestine, in 2009 was the highest level, due to the aggression on Gaza Strip which caused bad social, economic and political conditions within the Palestinian society, and the second shock in level of fragility was in 2014 for the same reason.Moreover, the average level of economic stability in Palestine during 2009-2018 and according to the FSI model was 8.3[2] and it was classified compared to surrounding countries as the worst.  The level of economic stability is measured according to FSI model by measuring three sub-dimensions. The first sub-dimension is related to stability of economic reality as this sub-dimension stability reached at 8.6 and mainly causes of weakness of economic stability in Palestine. The second sub-dimension is Economic Inequality for economic sectors where the level of stability reached at 8.3 and The level of Human Flight and Brain Drain, the third sub-dimension, was at 8.1. The elasticity of GDP per Capita, inflation, and unemployment rate (as the main indicator to evaluate the situation of elasticity of Palestinian economy) is a very week elasticity, which means again that the elasticity of the Palestinian economy is very weak. As a result of this weakness, the Palestinian economy is instable.  The correlation coefficient between level of economic stability and fragility in Palestine was 69.3%. This does not mean that the impact of economic stability on the fragility of Palestinian society is weak but it was strong, as the result shows that 47.3% of the value of fragility of Palestinian society is explained by the value of economic stability. Finally, the results show that restructuring  Palestinian economic system was the first requirements to reduce level of instability and fragility of the economy in Palestine, the second one reduced the impact of corruption on the economy, and the third was restructuring the education sector in line with the Palestinian market. For this the main recommendation was restructuring the Palestinian economic system to increasing the contribution of agricultural and industrial sectors in the Palestinian economy. Thus, it increases the elasticity of the economic system, which means increases the level of stability and reduces the level of fragility.

  1. Introduction:

Palestinian society has been shocked more than one time during the last hundred years. The British mandate on Palestine, then the Jordanian annexation of West Bank, as followed by  Israeli occupation and finally,  the autonomy rule tailored by agreements which forms no difference from the mandatory, annexation or occupation. These shocks, since 1917, have been functioning as a hammer that has not stopped beating the fabric of Palestinian society, and the colonial occupation still constantly trying to crack the economic stability, social, political and environmental reality in the Palestinian society, as well,  seeking to erase the existence of the Palestinian people.

After these shocks and confiscation of all Palestinian resources by the Israeli occupation, the reaction was the protection of the Palestinian human element by developing them, by implying flexiblity to adapt to economic, social and political pressures.  Illiteracy in Palestine is the lowest in MENA region, reaching at 2.8% for individuals aged 15 years and over in 2017, the percentage of Palestinians aged 15 years and over whose holding a Bachelor  degree and Above are  forming 17.3% in 2017, and life expectancy is high and it is near to developed countries, reaching at 73.8 years in 2017.

However, the fragility was the result of these situations, and it is the greatest challenge for Palestinians to achieve a suitable level of development. Where the fragility level has a direct impact on the level of sustainability of development.

Fragility is a multidimensional phenomenon. The main dimensions of fragility are the economic and political dimensions in addition to the social dimension. To make a change in the level of development in Palestine, first it is necessary to diagnose and measure the fragility level of Palestinian society, and this can only be done by measuring the levels of stability in the main dimensions of the fragility (economic, political, and social). Moreover, by studying the relationship between fragility and his dimensions. This gives best solutions to reducing fragility by improving levels of economic, political and social stability then improving level of development in Palestine. Through this improvement, it would lead to a breakthrough in the concept of development under occupation, where this kind of development would be functional to achieving freedom from  Israeli military occupation.

  1. Methodology

A descriptive method was used to prepare this study. The study is based on tow main calculations, as the following:

  • Calculating elasticity of Palestinian economy during the last decade (2009-2018): The researcher used time-series data got from the Palestinian Central Bureau of Statistics (PCBS), those time-series data are of main economic indicators (GDP Per Capita and Inflation, Consumer Prices). The slope of the linear regression equations of those indicators equals elasticity of those indicators. The change in the value of the main economic indicators was used as the dependent variable and the time (2009-2018) was used as an independent variable.  The value of the elasticity for each indicator is equal to the value of the coefficient of the independent variable (linear regression slope) according to the linear equation (y = βx + α (where (y) the dependent variable, (x) the variable Independent).
  • Calculating levels of economic stability and fragility of Palestinian society the researcher developed a especial questionnaire by using FSI model, after re-molded it to suit Palestinian society. 80 Palestinian university professors in the Department of Economics and Economists in Palestinian research centers in 2018 used this tool to evaluate the level of stability of the Palestinian economy and the level of fragility of Palestinian society.
  • Study Purpose 

The study aims at measuring the level of fragility of the Palestinian society and the level of stability in the Palestinian economy, in addition to identifying required economic elements to reduce fragility.

  • Study Questions

The main questions of the study are:

  • What is the Performance of the Palestinian Economy?
  • What is the level of Economic Elasticity in Palestine?
  • What is the level of stability in the Palestinian economy?
  • What is the level of fragility of Palestinian society?
  • What is the impact of economic stability on the fragility of societies in the Palestinian case?
  1. Literature Review
    • Fragility of States

Fragility is a complex and multifaceted concept. There is not yet an internationally accepted definition of fragility and researchers, practitioners and policymakers alike conceptualize it in different ways[3].  According to the OECD, “a fragile region or state has weak capacities to carry out basic governance functions and lacks the ability to develop mutually constructive relations with society. Fragile regions or states are also more vulnerable to internal or external shocks such as economic crisis or natural disaster”[4]. More states that are resilient exhibit the capacity and legitimacy of governing a population and its territory. They can manage and adapt to changing social needs and expectations, shifts in elite and other political agreements, and growing institutional complexity. Fragility and elasticity should be seen as shifting points along a spectrum” [5].

When fragility refers to the state, fragility is, in fact, a property of the political system. A ‘fragile state’ is incapable of fulfilling its responsibility as a provider of basic services and public goods, which in turn undermines its legitimacy. This has consequences on society as a whole, threatening livelihoods, increasing economic downturn and other crisis that affect human security and the likelihood of armed conflict. In this sense, such phenomena constitutes consequences of fragility.  When fragility refers to society as a whole, violent conflict and other human-made crisis constitutes fragility itself. In this sense, fragility is a property of society and thus, is defined much more broadly, includes any kind of political, social or economic instability. This understanding of fragility is termed aa a ‘fragile social situation’[6].

The term ‘fragile state’ coexists with conceptually similar notions like ‘weak state’, ‘failing state’, ‘failed state’ or ‘collapsed state’, all of which may be defined as different stages along the fragility spectrum.  As for the development agenda, the realization of the specific challenges arising in fragile states and their impact on human development and poverty eradication efforts led to context-specific strategies and policies among donors – such as the above-mentioned OECD principles for good international engagement in fragile states and situations.

The need for context-tailored development assistance becomes evident when analyzing progress made towards reaching the Millennium Development Goals, with fragile states falling behind other developing countries[7].  Stewart and Brown (2009) find that all existing definitions are built around three main dimensions of fragility: authority, service, and legitimacy failures that occur, respectively, when the state fails to protect its citizens from violence, to provide basic services to all citizens and to be recognized as legitimate by its citizens[8].

Common features of fragile countries

Source: Overcoming Fragility in Africa
  • Measuring the fragility of states:
  • Why measuring the fragility of states is important?

‘A good prognosis for any disease is far more important than the quality of treatment’.  It is important for economic or policy or social objectives to be a clear and grounded in solid metrics. In formulating economic or policy or social development, metrics are important for understanding baselines and objectives. It helps to inform understanding and response to issues of social, economic, and political fragility based on solid data[9].

The indexes used to measuring fragility are a significant tool in focus on not only the usual pressures that all state experience but also in identifying when those pressures are outrunning a states’ capacity to manage those pressures. focusing on pertinent vulnerabilities that contribute to the risk of state fragility, these Indexes, and economic or policy or social frameworks and data analysis tools upon which it is built makes all risk assessment and early warning of conflict accessible to policy-makers and the public at large.  The increased importance of the fragile states agenda has demanded indexes and other tools to help identify and monitor situations of fragility and hence make context-specific responses possible. In order to understand the application of a given index, however, it is important to make a distinction between intended and real usage; whereas producers may envision a particular usage for an index, users may utilize an index for a different purpose. Whether each of those uses is valid must be based on the particular circumstances.  Producers of fragility indexes have diverse target audiences, ranging from governments, civil society, multilateral and bilateral donors, international lending agencies and private sector, to the academic and research community and media [10].

  • What happens when measuring the fragility of states is not perfectly valid or reliable?

There is no difference between the failure and fragility of the states. Chomsky answered the question of the impact of not perfectly measuring the fragility of states in his book “Failed States – The Abuse of Power and Assault on Democracy”. He mentions that describing the state as a failed state (fragile state) only serves the policies of the colonial countries, where they try to interfere in the affairs of other countries. He also mentions that often countries fail not for internal reasons but for external reasons, where colonial countries are fueling internal conflicts of ethnic, sectarian, sectarian or other, as is currently the case in our region. Governance systems in these countries are weakened by colonial countries to take their sovereign will, and to facilitate interference in their affairs and to impose conditions on them through coercion because these countries describe as failed states (fragile state)[11]. So, there are non-innocent use (destroyer use) if any fragility index gives any country a bad level in fragility because of not perfectly valid or reliable of the index.

The issue of state fragility is by its nature a sensitive topic. No country wishes to be known as a “fragile state” – but we cannot hope to address issues of fragility if we are not prepared to talk about it. In so doing, it is equally important that such discussions are based on facts and clear metrics, to avoid terms such as “fragile state” being thrown around casually. Conversations about state fragility need to be objective and most of all constructive, and a data-driven approach is critical to ensuring this[12].

  • Indexes of Fragility of states

The increasing of global interest on the fragility of states and its impact on sustainable development made the number of Indexes that measured the fragility of states so large. The users’ guide which prepared by the German Development Institute and the United Nations Development Program on measuring fragility[13] provided an analysis and comparisons detailed about the most important of these indexes in terms of the methodology of work for each index, where users’ guide mention that there are 11 Indexes (see table 1).

Table 1: Authoring institution and Producer of Fragility Indexes

                                Index      Producer Authoring institution
BTI-SW Bertelsmann Transformation Index State Weakness Index Bertelsmann Stiftung Bertelsmann Stiftung / Center for Applied Policy Research (Munich University)
CIFP Country Indicators for Foreign Policy Fragility Index Carleton University Norman Paterson School of International Affairs
CPIA Country Policy and Institutional Assessment (CPIA) / International Development Association (IDA) Resource Allocation Index (IRAI) The World Bank The World Bank
FSI Failed States Index  (Fragile States Index) Fund for Peace Fund for Peace
GPI Global Peace Index Institute for Economics and Peace Economist Intelligence Unit, with guidance from an international panel of experts
IAG Harvard Kennedy School Index of African Governance4 Harvard University Kennedy School of Government (Harvard University)
ISW Index of State Weakness in the Developing World Brookings Institution Brookings Institution / Center for Global Development
PCIL Peace and Conflict Instability Ledger University of Maryland Center for International Development and Conflict Management
PII Political Instability Index The Economist Group Economist Intelligence Unit
SFI State Fragility Index George Mason University Center for Global Policy (George Mason University)
WGI-PV World Governance Indicators, Political Stability, and Absence of Violence The World Bank The World Bank

Source: users’ guide on measuring fragility  P2

There are main five dimensions that must be coverage by those indexes, but it is not covered as it should.

Table 2: Conceptual dimensions covered by fragility indexes

Index Security Political Economic Social Environmental
CIFP Fragility Index x x x x x
Index of African Governance x x x x
Index of State Weakness x x x x
Peace and Conflict Instability Ledger x x x x
 Failed States Index  (Fragile States Index) x x x x
State Fragility Index x x x x
Country Policy and Institutional Assessment / IRAI x x x
Political Instability Index x x x
BTI State Weakness Index x x
Global Peace Index x
WGI Political Stability and Absence of Violence x

Source: users’ guide on measuring fragility  P25

  • How do the results of the fragility indexes differ?

As most indexes rely on similar data sources and apply mostly additive aggregation methods (of similar conceptual attributes), one may ask whether the resulting index scores resemble each other as well.  Bivariate correlations were used to determine how similar two indexes’ scores were.

Table 3: How similar are index results? Bivariate correlations

BTI-SW CIFP CPIA FSI GPI IAG ISW PCIL PII SFI WGI-PV
BTI-SW 1
CIFP 0.81 1
CPIA 0.61 0.56 1
FSI 0.82 0.93 0.59 1
GPI 0.79 0.78 0.66 0.82 1
IAG 0.84 0.89 0.62 0.84 0.83 1
ISW 0.82 0.92 0.69 0.85 0.75 0.94 1
PCIL 0.58 0.63 0.1 0.55 0.57 0.22 0.57 1
PII 0.64 0.72 0.48 0.74 0.70 0.69 0.52 0.49 1
SFI 0.81 0.92 0.57 0.86 0.76 0.81 0.89 0.66 0.66 1
WGI-PV 0.82 0.79 0.43 0.80 0.89 0.85 0.72 0.52 0.72 0.78 1

Source: users’ guide on measuring fragility  P29

From the above table, we show that the coefficients between indexes imply a large degree of similarity: for the most part, they range between 0.7 and 0.9. This is not unusual, however, for macro-social indicators. The reasons why the scores of fragility indexes are highly similar. First, it is possible that indexes actually measure their respective concepts with a high degree of accuracy. High correlations would show that the real-world phenomena that are being measured often occur jointly. Second, it is possible that the indexes do not measure the concepts accurately. Then, high correlations could be caused by the fact that most indexes use highly similar data sources. Moreover, We find that the FSI is the most closely related index by the other indexes. That encouraged the researcher to use this index to develop the study tools.

  • Fragile States Index (FSI)

Fragile States Index (FSI) is an annual ranking of 178 countries based on the different pressures they face that might impact their levels of fragility. It was set in the 1990s by the Fund for Peace (FFP), as Conflict Assessment System Tool (CAST), which was developed as a framework for policymakers and field practitioners to be able to better understand and measure conflict drivers and dynamics in complex environments. The CAST framework was used as the basis for the FSI, where researchers can determine state fragility assessed and ranked at a national level by using this framework.  FSI  inherently ranks different countries – making some more fragile than others – ultimately the goal of the FSI is to measure trends in pressures within each individual state. By identifying the most salient pressures within a country, it creates the opportunity for deeper analysis and planning by policymakers and practitioners alike to strengthen each state’s resiliency.

FSI used Twelve indicators to measure the condition of a state at any given moment. The indicators provide a snapshot in time that can be measured against other snapshots in a time series to determine whether conditions are improving or worsening. Below is the list of indicators used both in the CAST framework and also in the Fragile States Index.  Ranking all states with full membership in the United Nations where Taiwan,  Palestine, Northern Cyprus, Kosovo, and Western Sahara are not ranked, despite being recognized as sovereign by one or more other nations. The ranking is based on the sum of scores for 12 indicators. Each indicator is scored on a scale of 0 to 10, with 0 being the lowest intensity (most stable) and 10 being the highest intensity (least stable), creating a scale spanning 0−120.

Fragile States Index Indicators:

Twelve conflict risk indicators are used to measure condition of a state at any given time. The indicators provide a snapshot in time that can be measured against other snapshots in a time series to determine whether conditions are improving or worsening. Below is the list of indicators used both in the CAST framework and also in the Fragile States Index.

Source: https://fragilestatesindex.org/indicators/

Note: for more detail about the FSI indicators go to Appendix 1

FSI calculated by three main streams:

  1. Content Analysis:Each of the twelve indicators of the CAST framework is broken down into sub-indicators, and for each of these, hundreds of Boolean search phrases are applied to global media data to determine the level of the saliency of issues for each of those sub-indicators in each country.
  2. Quantitative Data: Pre-existing quantitative data sets, generally from international and multilateral statistical agencies (such as the United Nations, World Bank, World Health Organization) are identified for their ability to statistically represent key aspects of the indicators. The raw data sets are normalized and scaled for comparative analysis.
  3. Qualitative Review:Separately, a team of social science researchers independently reviews each of the 178 countries, providing assessments based on key events from that year, compared to the previous one. Recognizing that every data set and approach has different strengths and weaknesses, this step helps to ensure that dynamic year-on-year trends across different indicators are picked up – which may not be evident in lagging quantitative data sets that measure longer-term structural factors. It also helps to mitigate any potential false positives or negatives that may emerge from noisy content analysis data.
  • Elasticity as a solution of fragility

Elasticity determines persistence of relationships within a system and a measure of the ability of these systems to absorb changes of state variables, driving variables, and parameters, and still persist In this definition elasticity is the property of the system and persistence or probability of extinction is the result. Stability, on the other hand, is the ability of a system to return to an equilibrium state after a temporary disturbance. The more rapidly it returns, and with least fluctuation, the more stable it is. In this definition stability is the property of the system and degree of fluctuation around specific states the result[14]. The elasticity of a system, therefore, has to be assessed in relation to its functions. When applied to an economic system, elasticity is about the capacity of the market and its supporting institutions to “allocate resources efficiently or to deliver essential services”. When applied to a socioeconomic system, elasticity is about its capacity to enable society’s members to pursue their well-being and to satisfy needs and wishes that they could not fulfill if they were in isolation[15].

In an evolving world, socioeconomic systems experience changes, and shocks that could affect these elements. So, the capacity to maintain or reorganize these conditions enables a system’s members to exert their capabilities over time. In other words, if the capacity of a social system promotes well-being among its members, its elasticity makes this functionality durable.  How do different societies build elasticity, and on which components and mechanisms are elasticity-based? Two arguments can be put forward: [16]

  1. Proper functioning of the state supports the elasticity of a socioeconomic system, because it enhances human capabilities both in stable situations and, to a greater extent, in times of distress.
  2. In a socioeconomic system, managing adaptation processes in reaction to changes are not restricted to state institutions. In every society, nonstate actors elaborate their own capacities and systems for self-organization, adaptation, and learning. The sources of elasticity that originate in civil society include social cohesion and networks, social memory, 2 bonds of mutual trust and of penalization for wrongdoing, informal and private institutions regulating economic activities, resource use rights and dispute resolution.

The state shapes elasticity of the economic social structures because it sets the governance mechanisms in society, delivers public goods, provides basic services and protects citizen safety and security, all essential for building human capabilities.   Conversely, state fragility can undermine the elasticity of a socioeconomic system. Economic and human development, elasticity and the strengthening of state institutions are closely intertwined. If economic development strengthens state capacity and creates demand for the “state”, the formation processes and elements of functional and legitimate state entities would help people to perform their economic activities and to pursue their well-being even in the face of changes[17].

Elasticity is seen as a major part of our answer to fragility: helping build the capacity of states and societies to deal with increased risk and maintain or re-establish quickly their core functions after a shock. This reflects a change in perspective from how fragility was approached before: concentrating on the strengths that can be identified in states and societies and building on those rather than, as before, focusing on their weaknesses and seeking to identify and deliver a solution (which, if imposed from outside, usually does not work)[18].

Elasticity is a dimension of sustainable development Goals (SDGs), that can no longer be overlooked. Building and maintaining elasticity promote human well-being. In a static world, the degree to which members of a social system or group (households, communities, states) can control their destiny depends on the rights, identity, decision power and problem-solving mechanisms attached to membership[19]. Therefore Goal number 16 in SDGs on peaceful, just and equitable societies is included in the Agenda 2030 for sustainable development which means that putting the focus on conflict prevention is essential for building elasticity. Most post-conflict countries are also pre-conflict countries. This implies that post-conflict stabilization becomes conflict prevention[20]

  • Economic elasticity

Economic elasticity refers to the ability of the country to withstand a shock and recover quickly to potential after it falls into recession. Resilient economic structures herewith prevent economic shocks have significant and persistent effects on income and employment levels and thus they can reduce economic fluctuations[21].  Resilient economies are better able to weather shocks. This is particularly relevant in a monetary union, where the policy instruments to address the effects of significant economic events are more limited and where inflation differentials can exacerbate real interest rate differentials that can magnify shocks by fuelling economic booms. Resilient economies are able to avoid dangerous vulnerabilities and deal more efficiently with shocks, which helps preventing unsustainable booms and reducing the depth of recessions, thereby preventing the strong spillover-effects across the euro area witnessed through multiple channels during the crisis[22].  Based on previous definitions of elasticity, we show that elasticity depends on the adaptation of components systems (economic, social and political) to internal and external shocks. In other words, economic, social and political elasticity is conducive to economic, social and political stability. Flexibility is nowadays a dimension of development as it is an inevitable product of flexibility.

Interactions between state fragility and socioeconomic elasticity

 

 

 

Elasticity of

socioeconomic systems

External shocks
Impact on nonstate institutions and actors: households, civil society, economic institutions
Impact on state: public good endowments, public budget, fiscal balance
Policy reactions

 

Adaptation and coping strategies

 

Human and social well-being

 

State

fragility

Source: Overcoming Fragility in Africa

 

 

  • Economic Stability

There is an integral and interdependent relationship between concept of development and stability   (economic, political or social). The relationship in practice, for example, we can not create economic stability status without the development of the economic sectors or we can not raise the level of development without having stability situation. The stability in the countries or their (economic, political or social) systems is an effective tool to achieve the full well-being of the societies, through the State’s development programs and plans in various economic, political and social fields. Here we will review the concept of economic stability, as one of the development pillars and one of the fragility dimensions

The economic stability concept is one of the most common concepts in economic studies and literature. However, there is no standard definition, and economists combined economic stability and financial stability because economic stability contributes to financial stability and vice versa is true. In addition, several international initiatives to promote financial stability include several macroeconomic performance indicators relevant to financial stability[23].

The IMF Promoting economic stability is partly a matter of avoiding economic and financial crises, large swings in economic activity, high inflation, and excessive volatility in foreign exchange and financial markets. Instability can increase uncertainty, discourage investment, impede economic growth, and hurt living standards. A dynamic market economy necessarily involves some degree of volatility, as well as gradual structural change. The challenge for policymakers is to minimize instability in their own country and abroad without reducing the economy’s ability to improve living standards through rising productivity, employment, and sustainable growth.  Economic and financial stability is both a national and a multilateral concern. As recent financial crises have shown, economies have become more interconnected. Vulnerabilities can spread more easily across sectors and national borders[24].

The United Nations consider any economic system is stable if it can absorb the impact of shocks which exposed because of the system’s weaknesses then warranty that the economy quickly recovers[25]. Economic stability refers to the absence of excessive fluctuations in the macroeconomy. An economy with fairly constant output growth and low and stable inflation would be considered economically stable. An economy with frequent large recessions, a pronounced business cycle, very high or variable inflation, or frequent financial crises would be considered economically unstable[26].

Darussi in his thesis pointed that economic stability as “Full operation of the available economic resources and avoiding the big sudden changes in the level of prices while maintaining a real growth rate in the Gross national product (GNP)[27].  Economic stability means the economy of a region or country shows no wide fluctuations in key measures of economic performance, such as gross domestic product, unemployment or inflation. Rather, stable economies demonstrate modest growth in GDP and jobs while holding inflation to a minimum. Government economic policies strive for stable economic growth and prices, while economists rely on multiple measures for gauging the amount of stability[28].

A stable economy demonstrates steady, manageable growth in GDP and employment. Manageable growth means the economy grows at a sustained rate that does not spark inflationary pressures, resulting in higher prices and negatively affect corporate profits.  An economy that shows steady growth for one quarter of the year, followed by a sharp decline in GDP or a rise in unemployment in the next quarter, indicates economic instability. Economic crises, such as the global credit crunch of 2008, cause worldwide economic instability, lowering production, employment and other measures of economic health[29].

 

  • Key measures of economic performance[30]

Traditionally, the key measures of economic performance in macroeconomics include:

  1. Economic growth – real GDP growth.
  2. Inflation – e.g. target CPI inflation of 2%
  3. Unemployment – the target of full employment
  4. Current account – satisfactory current account, e.g. low deficit.
  5. Well-being Index

Measures Economic Performance

1.       Real GDP Economic growth
2.       Inflation
3.       Unemployment
4.       Current Account
5.       Well-being Index
Real Wages
Labor Productivity
Investment
Life Expectancy
Happiness Levels
Environmental  Factors

 

Source: https://www.economicshelp.org

As an overall look, it is important for economists to look beyond the headline statistics. Real GDP will always be useful for showing the stage in the economic cycle. It is of some use in indicating living standards. But, it is far from the ultimate guide. There is always a need to look at related statistics to give a better overall picture. For example, median real wages, unemployment rates, well-being index.

  • Calculate economic stability by FSI:

Economic indicators are one of the mine dimensions of FSI, which used to calculate the stability of economic, the economic indicators in FSI divided into three categories, of which:

E1: Economic Decline Questions to consider may include:

  • Government Debt: What is government debt?
  • Interest Rates: How are the interest rates – actual and projected?
  • Inflation Rate: How is the inflation rate – actual and projected?
  • Productivity: What is productivity?
  • GDP: What is the GDP – actual and projected?
  • Unemployment: How is the unemployment – current and rate of unemployment?
  • Consumer Confidence: How do people view the economy?
  • National Economy: How do experts view the economy?
  • Business Climate for FDI: Is the business climate attractive to FDI?
  • Business Climate for Entrepreneurship: Do the laws and access to capital allow for internal entrepreneurship?
  • Economic Focus: Does one product make up the majority of the economy?

E2: Uneven Economic Development Questions to consider may include:

  • Economic Equality – Gap: Is there a large economic gap?
  • Discriminatory Economics: Is the economic system discriminatory?
  • Economic Justice: Does economic justice exist?
  • Hiring Practices: Are hiring practices generally fair – legally and the perception of others?
  • Social System: Do equal rights exist in society?
  • Equal Rights Legislation: Are there laws protecting equal rights?
  • Free Education: Does free education exist and if so, to which grade?
  • Equal Education: Is the education provided relatively equal?
  • Fair Housing: Is there a housing system for the poor?
  • Job Training: Do programs for job training exist?
  • Access to Job Training: Use Do people know about job training and is it available based on qualification and need?
  • Ghettos or Slums: Do ghettos and slums exist?

E3: Human Flight and Brain Drain Questions to consider may include*:

  • Professional Flight: Are professionals leaving the country?
  • Political Drain or Return: Are politicians leaving the country?
  • Brain Drain: Is there a relatively high proportion of higher educated people leaving the country?
  • Return of Middle Class: Is the middle class beginning to return to the country?
  • Remittances: Are there a large number of remittances coming to families from relatives overseas?
  1. Fragility of Palestinian Society

During the last decade (2009-2019) the level of fragility of Arab wold society was 81.3[31], FSI scale describes this level as high warning.

Fragility level of the Arab world, 2009-2019

Source: Calculated by the researcher

Fragile States Index Heat Map for the Arab world, 2019

Source: https://fragilestatesindex.org/wp-content/uploads/2019/04/2019-FSI-Heat-Map-Country-Names.pdf.

Fragility level of the Arab world  by Country, 2009-2019

Country 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Algeria 80.6 81.3 78.0 78.1 78.7 78.8 79.6 78.3 76.8 75.8 75.4
Bahrain 59.0 58.8 59.0 62.2 62.9 64.7 64.4 63.4 64.9 64.4 63.8
Comoros 86.3 85.1 83.8 83.0 84.0 85.1 83.3 83.8 84.8 82.6 81.7
Djibouti 80.6 81.9 82.6 83.8 85.5 87.1 88.0 89.7 88.9 87.1 85.1
Egypt 89.0 87.6 86.8 90.4 90.6 91.0 89.9 90.2 89.8 88.7 88.4
Iraq 108.6 107.3 104.8 104.3 103.9 102.2 104.4 104.7 105.4 102.2 99.1
Jordan 77.9 77.0 74.5 74.8 75.7 76.7 76.9 78.0 78.7 76.8 75.9
Kuwait 63.4 61.5 59.5 58.8 59.6 59.0 57.5 58.5 58.5 55.9 53.2
Lebanon 93.5 90.9 87.7 85.8 86.3 86.9 88.1 89.6 88.2 86.8 85.0
Libya 69.4 69.1 68.7 84.9 84.5 87.8 95.3 96.4 96.3 94.6 92.2
Mauritania 88.7 89.1 88.0 87.6 91.7 93.0 94.9 95.4 93.7 92.2 90.1
Morocco 77.1 77.0 76.3 76.1 74.3 74.4 74.6 74.2 74.9 74.0 73.0
Oman 47.2 48.7 49.3 51.7 52.0 53.1 52.0 51.6 52.5 52.6 50.0
Palestine 88.9 84.9 83.0 84.3 84.8 88.0 86.8 87.8 87.6 86.4 83.9
Qatar 51.9 51.8 49.5 48.0 47.1 48.9 46.3 45.1 44.0 48.1 45.4
Saudi Arabia 77.5 77.5 75.2 73.4 72.7 73.1 71.6 72.2 71.2 70.2 70.4
Somalia 114.7 114.3 113.4 114.9 113.9 112.6 114.0 114.0 113.4 113.2 112.3
Sudan 112.4 111.8 108.7 109.4 111.0 110.1 110.8 111.5 110.6 108.7 108.0
Syria 89.8 87.9 85.9 94.5 97.4 101.6 107.8 110.8 110.6 111.4 111.5
Tunisia 67.6 67.5 70.1 74.2 76.5 77.5 75.7 74.6 74.2 72.1 70.1
United Arab Emirates 51.8 52.4 50.4 48.9 47.3 47.6 46.2 44.5 43.7 42.8 40.1
Yemen 98.1 100.0 100.3 104.8 107.0 105.4 108.2 111.5 111.1 112.7 113.5

Source: Arab countries data are from the FIS database (https://fragilestatesindex.org/excel/) except Palestine data calculated by the researcher.

According to FSI  model, the level of fragility of Palestinian society during the last decade was 86.0 and it was 83.9 in 2019, and this level is considered in FSI scale as a high warning level.

Fragility level of Palestinian Society, 2009-2019

Source: Calculated by the researcher.

During the last decade, there was a fluctuation in the level of fragility in Palestine, in 2009 was the highest level, due to the aggression on Gaza Strip which caused bad social, economic and political conditions within the Palestinian society, and the second shock in level of fragility was in 2014 for the same reason.

In general, when examining the reason for the fragility of the Palestinian society during the last decade (2009-2019) based on the FSI model, we find that economic stability has the lowest level of stability 8.30, then external interference 7.86 (note that this dimension after 2015 has the lowest level of stability).  And the level of stability of other FSI dimensions was 6.13 for Cohesion in Society, 6.64 for Political Stability and 7.50 for Social Stability.

Stability Level for FSI dimensions in Palestine, 2009-2019

Year Cohesion in Society Economic  Stability Political Stability Social Stability External Intervention
2009 6.07 8.78 6.76 7.95 7.81
2010 5.67 8.66 6.56 7.48 7.38
2011 5.67 8.41 6.39 7.23 7.30
2012 5.91 8.39 6.61 7.08 7.55
2013 6.12 8.25 6.60 7.27 7.50
2014 6.70 8.17 6.72 7.60 7.68
2015 6.33 8.13 6.73 7.62 8.10
2016 6.33 8.19 6.82 7.72 8.45
2017 6.30 8.17 6.77 7.80 8.40
2018 6.23 8.12 6.64 7.61 8.32
2019 6.09 8.08 6.39 7.13 8.00
Average 6.13 8.30 6.64 7.50 7.86

Range of Stability )0.0 more stable – 10.0 less stable)

Source: Calculated by the researcher.

  1. Stability of Palestinian Economic (By using FSI model)

Average of the Economic Stability Level of the Arab World  During the Last Decade (2009-2019) by Country

Range of Stability )0.0 more stable – 10.0 less stable)

Source: Calculated by the researcher.

Economic Stability level of the Arab world  by Country, 2009-2019

Country 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Average
Algeria 6.0 6.1 5.9 5.8 5.7 5.7 5.8 6.2 6.3 6.2 6.1 6.0
Bahrain 4.4 4.5 4.2 3.9 4.1 4.1 3.9 3.8 4.0 3.9 3.9 4.1
Comoros 6.7 6.7 6.7 7.0 7.3 7.5 7.6 7.7 7.6 7.4 7.1 7.2
Djibouti 6.0 6.1 6.0 6.2 6.5 6.7 7.0 6.9 6.8 6.7 6.6 6.5
Egypt 6.9 6.7 6.5 6.7 6.9 6.6 6.4 6.3 6.3 6.3 6.3 6.6
Iraq 8.4 8.6 8.3 8.3 8.0 7.7 7.6 7.4 7.2 6.9 6.6 7.7
Jordan 6.3 6.1 5.8 5.9 5.7 5.6 5.3 5.4 5.3 5.3 5.5 5.6
Kuwait 4.6 4.7 4.7 4.4 4.1 3.9 3.6 3.5 3.6 3.5 3.3 4.0
Lebanon 7.0 6.8 6.4 6.1 5.8 5.8 5.7 5.7 5.7 5.6 5.6 6.0
Libya 5.5 5.5 5.1 5.5 5.3 6.0 6.8 6.8 6.8 6.5 6.3 6.0
Mauritania 6.6 6.6 6.4 6.4 6.7 6.8 7.1 7.2 7.1 7.0 6.7 6.8
Morocco 6.8 6.8 6.6 6.5 6.4 6.5 6.4 6.4 6.4 6.3 6.2 6.5
Oman 2.7 3.0 2.8 3.0 3.3 3.6 3.5 3.6 3.7 4.0 3.6 3.3
Palestine 8.8 8.7 8.4 8.4 8.3 8.2 8.1 8.2 8.2 8.1 8.1 8.3
Qatar 4.3 4.3 3.9 3.6 3.6 3.8 3.6 3.3 3.1 2.9 2.7 3.6
Saudi Arabia 4.4 4.6 4.5 4.3 4.4 4.5 4.6 4.6 4.4 4.3 4.3 4.4
Somalia 8.6 8.6 8.6 8.8 8.9 8.9 9.1 9.3 9.3 9.2 9.1 9.0
Sudan 8.5 8.3 7.9 8.1 8.2 8.3 8.4 8.5 8.3 8.1 8.0 8.2
Syria 7.2 6.9 6.5 6.6 6.6 6.8 7.3 7.9 8.1 8.1 8.2 7.3
Tunisia 5.8 5.7 5.6 5.7 5.7 5.8 5.8 5.9 5.9 5.9 5.8 5.8
United Arab Emirates 4.1 4.3 4.2 3.9 3.6 3.5 3.2 2.9 2.8 2.8 2.5 3.4
Yemen 8.2 7.9 7.6 8.0 8.2 8.1 8.3 8.4 8.3 8.3 8.4 8.2

Range of Stability )0.0 more stable – 10.0 less stable)

Source: Calculated by the researcher.

.

Economic Stability level according to FSI in Palestine by sub-dimensions of Economic Stability, 2009-2018

Year Economic

Reality

Economic Inequality Human Flight and Brain Drain Economic

Stability

2009 8.7 8.7 8.9 8.8
2010 8.5 9.0 8.5 8.7
2011 8.1 8.9 8.3 8.4
2012 8.4 8.8 8.0 8.4
2013 8.5 8.5 7.8 8.3
2014 8.7 7.8 8.1 8.2
2015 8.7 8.0 7.8 8.1
2016 8.8 7.9 7.8 8.2
2017 8.8 7.8 7.9 8.2
2018 8.8 7.6 8.0 8.1
2019 8.8 7.2 8.2 8.1
Average 8.6 8.2 8.1 8.3

Range of Stability )0.0 more stable – 10.0 less stable)

Source: Calculated by the researcher.

The average level of economic stability in Palestine during 2009-2019 and according to the FSI model was 8.3 and classified as the worst as in comparison to the surrounding countries.  The level of economic stability is measured according to FSI model by measuring three sub-dimensions. The first sub-dimension is related to the stability of the economic reality where this sub-dimension stability reached 8.6 and it was mainly cusses of the weakness of economic stability in Palestine. The second sub-dimension is Economic Inequality in economic sectors where level of stability reached 8.2 and the level of Human Flight and Brain Drain, the third sub-dimension, was 8.1.

  • Economic reality stability

Measuring the level of stability of economic reality is related to measuring the average of 9 levels. The result shows that all those levels were very low stability, with the range of stability between (8.3-9.4). The worst level of attraction for foreign investment (9.4) was a reflection of unstable economic reality.

Level of Stability in Economic Reality according to FSI in Palestine, 2019

Economic Reality Stability
Interest rates of banks and lending institutions 8.3
Commodity prices with household living standards 9.1
Efficient use of available resources 9.0
Palestinian Consumer Confidence in the Palestinian Economy 8.5
The confidence of economists in the Palestinian economy 8.3
Attract foreign investment 9.4
Attract to internal entrepreneurship 8.3
Encourage competition and prevent monopoly 8.8
Cost of basic goods and services (health, education, electricity, water, fuel) 9.1
Average 8.8

Range of Stability )0.0 more stable – 10.0 less stable)

Source: Calculated by the researcher.

  • Economic Inequality

Measuring the level of stability of Economic Inequality is related to measuring the average of 8 levels. The result shows that stability of all those levels was very low, within a range of stability between (6.3-8.0). The worst level of Equal employment practices in different economic sectors (8.0) was a reflection of unstable Economic Inequality.

Level of Stability in Economic Inequality according to FSI in Palestine, 2018

Economic Inequality Stability
Equal opportunities between economic sectors 7.7
Equal rights for different economic sectors laws 6.9
Equal employment practices in different economic sectors 8.0
Equal quality of education in all Palestinian communities 6.3
Equal quality of health in all Palestinian communities 7.1
Equal access to job training opportunities for all segments of society 7.9
The equal ability of citizens to obtain loans from the banking system 6.8
Equality of knowledge and competition for jobs, each according to his specialty 7.1
Average 7.2

Range of Stability )0.0 more stable – 10.0 less stable)

Source: Calculated by the researcher.

  • Human Flight and Brain Drain

Measuring the level of stability of Human Flight and Brain Drain is related to measuring the average of 6 levels. The result shows that all those levels were very low stability, with the range of stability between (6.9-9.4). The worst level of Unemployment, lack of financial return for various scientific and technical competencies, low expenditure on scientific research and impact on brain drain in Palestine (9.4) was a reflection of unstable Human Flight and Brain Drain.

Level of Stability in Human Flight and Brain Drain according to FSI in Palestine, 2019

Human Flight and Brain Drain Stability
Emigration of Palestinian Professionals / Technicians Outside Palestine 7.5
The size of the migration of Palestinian intellectual elites outside Palestine 7.9
Political Corruption, Lack of Democracy, Human Rights Violations and Impact on the Brain Drain in Palestine 7.9
Unemployment, lack of financial return for various scientific and technical competencies, low expenditure on scientific research and impact on brain drain in Palestine 9.4
Equal opportunities among graduates of national and foreign universities on the brain drain in Palestine 6.9
The creation of an appropriate climate for governments and their creativity, and benefit from experience and skills in the absence of proper scientific planning and impact on the brain drain in Palestine 9.3
Average 8.2

Range of Stability )0.0 more stable – 10.0 less stable)

Source: Calculated by the researcher.

  1. Performance of the Palestinian Economy During the Last Decade (2009-2019)

6.1 Gross Domestic Product  (GDP)

               There was a slowdown in the GDP growth during the last decade in Palestine, this slowdown refers to the affected the Palestinian economy by many factors, where the GDP growth in 2019 increase by 0.9% compared to 9.6% in 2011.

               The continued decline in the value of grants and assistance to Palestine after 2009 was the most important reason of this slowdown, moreover the continued restrictions on the movement of goods and people, and the siege of Gaza Strip, where they led to a slowdown in the growth rate in the West Bank, and a sharp decline in Gaza Strip during 2019. As a result of this slowdown, the contribution of the Gaza Strip to GDP declined to 17.9% in 2019, compared to 39.4% in 2005.

GDP in Palestine by Region, 2009-2019 At Constant Prices

The base year 2015

Source: Palestinian Central Bureau of Statistics, 2020.   Performance of the Palestinian Economy, 2019.   Ramallah – Palestine.  P14

GDP growth in Palestine, 2010-2019

Source: Calculated by the researcher.

6.2 GDP Per Capita

GDP per capita in Palestine declined in 2019, compared to 2018, amounting to USD 3,364.5, it decreased in the West Bank by 1.1% amounting to USD 4,802.5, whereas it declined by 2.8% in Gaza Strip reaching USD 1,416.8 during 2019.  This leads to decreasing the gap between them, where the GDP per capita in Gaza Strip represented 29.5% of the GDP per capita in the West Bank in 2019, and remained lower than its rate in 1994, when it was 96.5%.

GDP Per Capita in Palestine by Region, 2009-2019 At Constant Prices

The base Year 2015

Source: Palestinian Central Bureau of Statistics, 2020.   Performance of the Palestinian Economy, 2019.   Ramallah – Palestine.  P16

The Palestinian economy encompasses several economic activities.  It is predominantly a service economy as a result of the services and other branches activities contribution to GDP and to employment. Where Services and other branches activities ranked first in the Palestinian economy, value-added in 2018, the percentage contribution to GDP was 37.5%, on the other hand,  Industry activities contributed by 13.2% to GDP during 2018, while Agriculture contributed by 3.0% to GDP during the year 2018.

Table 4: Value-added (USD Millions) of main economic activities by region 2015-2019, at constant prices: the base year 2015     

Economic Activity 2015 2016 2017 2018 2019
Agriculture 1,035.2 1,142.9 1,074.1 1,091.1 1,091.5
Industry 1,629.7 1,829.4 2,094.2 2,056.6 2,053.3
Construction 665.3 780.3 818.8 920.8 898.1
Wholesale and Retail Trade 2,760.0 2,950.5 3,165.5 3,346.1 3,372.0
Transportation and Storage 257.4 274.6 275.6 278.0 255.5
Information and Communications 549.8 523.6 486.3 497.0 492.7
Services and Other Branches                                                                         5,051.4 5,545.8 5,158.3 5,127.9 5,266.3
Gross Domestic Product (GDP) 13,972.4 15,211.0 15,426.9 15,616.2 15,764.4

Source: Palestinian Central Bureau of Statistics, 2020.   Performance of the Palestinian Economy, 2019.   Ramallah – Palestine.  P18

Table 5: Percentage contribution of economic activities to GDP in Palestine, 2015-2019 at constant prices: the base year 2015

Economic Activity 2015 2016 2017 2018 2019
Agriculture 7.4% 7.5% 7.0% 7.0% 6.9%
Industry 11.7% 12.0% 13.6% 13.2% 13.0%
Construction 4.8% 5.1% 5.3% 5.9% 5.7%
Wholesale and Retail Trade 19.8% 19.4% 20.5% 21.4% 21.4%
Transportation and Storage 1.8% 1.8% 1.8% 1.8% 1.6%
Information and Communications 3.9% 3.4% 3.2% 3.2% 3.1%
Services and Other Branches                                                                         36.2% 36.5% 33.4% 32.8% 33.4%

Source: Calculated by the researcher.

6.3 Revised Unemployment Rate

Labor Force is the most important production factor in  Palestinian economy, especially in the face of limited natural resources and Israeli control over land, water, and mobility of people, goods and capital.  The size of the labor force in Palestine increased during 2019 by 2.8% compared to 2018.  The number of employed individuals increased by 3.5%, where the number of employed individuals in Palestine reached 950.9 thousand employed individual during the year 2019 compared to 918.8 thousand employed individual in 2018.

In Gaza Strip the size of the labor force increased by 6.6% compared to 2018, and the number of employed individuals increased by 2.8%, since the increase in the number of unemployed individuals was more than the rise of size of the labor force, this led to increasing the revised unemployment rate to 45.1% during 2019 compared to 43.1% in 2018.  Whereas in the West Bank the decrease in the number of unemployed individuals and increase the size of the labor force, this led to decreasing the revised unemployment rate to 15.3% during 2019 compared to 17.7% in 2018.

Revised Unemployment Rate in Palestine by region, 2015-2019

Source: Palestinian Central Bureau of Statistics, 2020.   Performance of the Palestinian Economy, 2019.   Ramallah – Palestine.  P21

6.4 Prices and Purchasing Power

Consumer price index (CPI) recorded an increase by 1.58% in 2019, compared to 2018, reaching 101.58 (base year 2018). The rising resulted mainly from the increase in the food and non-alcoholic beverages group by 3.33%, it was followed by personal care, social protection and miscellaneous goods and services group by 5.64%, recreation, sport, culture, gardens and pets group by 12.33%, alcoholic beverages, tobacco and narcotics group by 1.36%.

Trend in consumer price index (CPI) in Palestine, 2015- 2019

Base year: 2018= 100

Source: Palestinian Central Bureau of Statistics, 2020.   Performance of the Palestinian Economy, 2019.   Ramallah – Palestine.  P28

6.5 Current Balance (Deficit)

The current balance in Palestinian government in 2019 recorded a deficit of USD 912.4 million compared to USD 720.6 million in 2018, increasing by 26.6%.  This is mainly explained by an increase in current expenditures and net lending value by 5.2% compared to 2018, despite of the increase in total net public revenues value by 0.8% compared to 2018.

Current Balance Deficit in Palestine, 2009-2019

Source: Palestinian Central Bureau of Statistics, 2020.   Performance of the Palestinian Economy, 2019.   Ramallah – Palestine.  P32

6.6 Trade Balance

The value of trade balance deficit increased by 1.2% in 2019 compared to 2018, reaching USD 6,500.7 million.  This increase in the value of trade balance deficit resulted from the increase in the value of total imports of goods and services by 1.4% in 2019, which reached USD 9,153.1 million, despite of increasing in the value of exports by 2.1%, representing USD 2,652.4 million.  Furthermore, the ratio of trade balance deficit to imports recorded a slightly decrease to reach 71.0% in 2019, compared to 71.2% in 2018.  As shown in the figure below, the deficit in the trade balance value worsened significantly during the the last decade, 2009-2019 as a result of the steady increase of imports compared to exports.

Trade Balance Deficit of goods and services in Palestine, 2009-2019

Source: Palestinian Central Bureau of Statistics, 2020.   Performance of the Palestinian Economy, 2019.   Ramallah – Palestine.  P44

6.7 International Investment Position (IIP)

During the last decade, there was a fluctuation in the value of international investment position- Net in Palestine. The net international investment position (IIP) value for Palestine increased by 32.1% at the end of 2019, reaching USD 2,098 million, compared to USD 1,588 million at the end of 2018, due to the increase of the value of total stocks of the Palestinian assets abroad despite the rise of the value of total stocks of foreign liabilities in Palestine at the end of 2019.

International Investment Position- Net in Palestine, 2009-2018

Source: Palestinian Central Bureau of Statistics, 2020.   Performance of the Palestinian Economy, 2019.   Ramallah – Palestine.  P47

  1. Economic Elasticity in Palestine

In economics, elasticity is the measurement of the proportional change of an economic variable in response to a change in another. It shows how easy it is for the supplier and consumer to change their behavior and substitute another good, the strength of an incentive over choices per the relative opportunity cost.

  • GDP Per Capita Elasticity

A cording to the value of the slope of the linear regression equation for the change of GDP Per Capita during the time (2009-2018) of which:

where , ,

which means

The elasticity of GDP per Capita (as the main indicator to evaluate the situation of elasticity of Palestinian economy) is a very week elasticity.

Change in  GDP Per Capita in Palestine, 2009-2019

Source: Calculated by the researcher.

  • Inflation, Consumer Prices Elasticity

For more assurance on the level of elasticity of the Palestinian economy, I will calculate the elasticity of another main economic indicator (inflation) by using the same above method.

Where the value of the slope of the linear regression equation for the change of inflation during the time (2009-2018) of which:

where , ,

which means

That means there are no differences between the level of elasticity of inflation and the level of elasticity of GDP per Capita.  Both levels have a very weak elasticity, which means again that the elasticity of the Palestinian economy is very weak. As a result of this weakness, the Palestinian economy is instability.

Inflation, Consumer Prices (%) in Palestine, 2009-2018

Source: Calculated by the researcher.

  • Unemployment rate Elasticity

For more assurance on the level of elasticity of the Palestinian economy, I will calculate the elasticity of another main economic indicator (Unemployment rate) by using the same above method.

Where the value of the slope of the linear regression equation for the change of inflation during the time (2009-2018) of which:

where , ,

which means

That means there are no differences between the level of elasticity of unemployment rate, inflation and the level of elasticity of GDP per Capita.  All those levels have a very weak elasticity, which means again that the elasticity of the Palestinian economy is very weak. As a result of this weakness, the Palestinian economy is instability.

Change in the unemployment rate (%) in Palestine, 2009-2018

Source: Calculated by the researcher.

  1. Impact of Economic Stability on Fragility
  • Correlation between stability and fragility

The correlation coefficient between the level of economic stability in all countries of the world and fragility was 92.3%. And the result shows that 85.2% of the value of fragility explains by the value of economic stability, which means the main control of the fragility around the world is the stability of economic.

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate
1 0.923a 0.852 0.852 9.0428
  1. Predictors: (Constant), Economic Stability

The level of Economic Stability and the level of Fragility in the world, 2018

Source: Calculated by the researcher.

At the Palestinian level, the correlation coefficient was lower than in the rest of the world, between the level of economic stability in all countries of the world and fragility was 69.3%. This does not mean that the impact of economic stability on the fragility of Palestinian society is weak but it was strong, where the result shows that 47.3% of the value of fragility of Palestinian society explains by the value of economic stability.

The level of Economic Stability and the level of Fragility in Palestine, 2018

Source: Calculated by the researcher.

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate
1 0.693a 0.480 0.473 9.46081
  1. Predictors: (Constant), Economic Stability
  • Elements of economic development which need to reduce the fragility of the Palestinian society

We have talked about the impact of stability and elasticity of  Palestinian economic on the level of fragility of Palestinian society. In order to Palestinian university professors in the Department of Economics and Economists in Palestinian research centers evaluate  (commensurate with the Palestinian reality of level of economic stability and level of fragility), they rank the requirements which need to reduce the level of instability of economy and fragility in Palestine, where restructuring the Palestinian economic system was the first of the requirements to reduce fragility, the second one was   Reduce the impact of corruption (in the government and private sectors) on the economy, and the third was Restructuring the education sector in line with the Palestinian market.

Arrange the elements of economic development to be achieved to reduce the fragility of Palestinian society

Economic development required to reduce fragility Ranks
Restructuring the Palestinian economic system 1
Reduce the impact of corruption (in the government and private sectors) on the economy 2
Restructuring the education sector in line with the Palestinian market 3
Raising the efficiency of national industries and enhancing the theory of substitution of the Palestinian product at the expense of the imported product 4
Raising the share of the scientific research sector in universities from the government budget 4
Reducing abuses and violations against the Palestinian economy 4
Enact legislation that meets the needs of economic development 7
Providing protection networks for farms and supporting production requirements in the agricultural sector 8
Developing the role of productive sectors in the Palestinian economy 9
Enhance the government’s ability to exploit its natural resources, which are besieged or confiscated by the occupation 10
Activating the role of the government in setting economic policies and development programs 11
Reducing government interventions in the Palestinian economy 12
Strengthening the cycle of the religious tourism industry 13
Enhancing the role of the Palestinian market in defining the Palestinian economy 14

Results

  • The level of fragility of Palestinian society has reached to alerting level, and this result corresponds to the level of fragility of the Arab countries surrounding Palestine.
  • The level of economic stability in Palestine has a significant impact on the high level of fragility of Palestinian society.
  • Most economic indicators have high levels of instability, causing a high level of instability for the Palestinian economy and a high level of fragility.
  • The elasticity of the main economic indicators was very low, which cause a weakness in the elasticity of the Palestinian economy, causing a high level of instability for the Palestinian economy and a high level of fragility.
  • To use the development of the economic system as a tool to reduce the fragility of Palestinian society, first, we most restructuring the Palestinian economic system to be suitable for the reality of the Palestinian economy which greatly affected by the Israeli occupation, especially the Israelis, controlled the crossings.
  • The second one was to reduce the impact of corruption (in the government and private sectors) on the economy, and the third was Restructuring the education sector in line with the Palestinian market.

Conclusions and recommendations

The structure of the Palestinian economic system, which was established by relying on a system of development assistance, which reinforced the free market system or the open market, which proved its failure to manage the Palestinian economy in proportion to the shocks suffered by the Palestinian society, either through the occupation, which seeks every day to destroy the economic system of the Palestinian society, or through the global economic system which based on the dominance of the major economies, which enhances the dependency of small systems. This was confirmed by the level of economic stability during the last decade and the need to restructure the Palestinian economy as a requirement to develop the economic system in Palestine.

By looking at the contribution of the economic sectors in the GDP in Palestine, during the last decade, we could describe the Palestinian economy as a service economy, not an agricultural neither industrial. This economy has not the ability to withstand shocks, resist and cope with shocks. it is weak ؤompared with the big economic systems can not keep pace. This was clearly in the impact of the investment climate, inflation, and equal opportunities, which resulted in a highly alarming level of economic reality, which was reflected in the per capita GDP, reflecting the weakness of the Palestinian economy. Therefore, the contribution of the industrial and agricultural sectors in Palestine must be increased as its important role in promoting stability and reducing fragility.

[1] Range of Fragility (0.0 less fragile – 120.0 more fragile)

[2] Range of Stability )0.0 more stable – 10.0 less stable)

[3] Mata, J. Ziaja, S. 2009: Users’ Guide on Measuring Fragility, German Development Institute/ United Nations Development Programme. Bonn, Germany. P 5

[4] OECD 2014 :Domestic revenue mobilisation in fragile states. OECD publishes on an annual basis since 2005 a report on fragile states. See “Fragile states 2015: Meeting the post 2015 ambitions”. P16

[5] https://ec.europa.eu/europeaid/policies/fragility-and-crisis-management_en#_ftnref1 (Resilience and Fragility)

[6] Mata, J. Ziaja, S. 2009: Users’ Guide on Measuring Fragility, German Development Institute/ United Nations Development Programme. Bonn, Germany. P 5

[7] Mata, J. Ziaja, S. 2009: Users’ Guide on Measuring Fragility, German Development Institute/ United Nations Development Programme. Bonn, Germany. P 5

[8] European Communities, 2009, European Report on Development 2009, Overcoming Fragility in Africa, Robert Schuman Centre for Advanced Studies, European University Institute, San Domenico di Fiesole. P16

[9] International Fund for Agricultural Development (IFAD), 2018, Defining and measuring state fragility, A conversation with J.J. Messner, Executive Director of The Fund for Peace, and speaker at IFAD’s annual Lecture Series during the Governing Council meeting, 2018. (https://www.ifad.org/en/web/latest/story/asset/40174446)

[10] Mata, J. Ziaja, S. 2009: Users’ Guide on Measuring Fragility, German Development Institute/ United Nations Development Programme. Bonn, Germany. P 8

[11] Chomsky, N. 2006. Failed States – The Abuse of Power and Assault on Democracy, Metropolitan Book, New York USA. P106-110

[12] International Fund for Agricultural Development (IFAD), 2018, Defining and measuring state fragility, A conversation with J.J. Messner, Executive Director of The Fund for Peace, and speaker at IFAD’s annual Lecture Series during the Governing Council meeting, 2018. (https://www.ifad.org/en/web/latest/story/asset/40174446)

[13] Mata, J. Ziaja, S. 2009: Users’ Guide on Measuring Fragility, German Development Institute/ United Nations Development Programme. Bonn, Germany.

[14] https://www.resalliance.org/key-concepts (Holling 1973, Gunderson & Holling 2002, Walker et al. 2004)

[15] European Communities, 2009, European Report on Development 2009, Overcoming Fragility in Africa, Robert Schuman Centre for Advanced Studies, European University Institute, San Domenico di Fiesole. P72

[16] European Communities, 2009, European Report on Development 2009, Overcoming Fragility in Africa, Robert Schuman Centre for Advanced Studies, European University Institute, San Domenico di Fiesole. P71

[17] European Communities, 2009, European Report on Development 2009, Overcoming Fragility in Africa, Robert Schuman Centre for Advanced Studies, European University Institute, San Domenico di Fiesole. P74

[18] https://ec.europa.eu/europeaid/policies/fragility-and-crisis-management_en#_ftnref1 (Resilience and Fragility)

[19] European Communities, 2009, European Report on Development 2009, Overcoming Fragility in Africa, Robert Schuman Centre for Advanced Studies, European University Institute, San Domenico di Fiesole. P71

[20] https://ec.europa.eu/europeaid/policies/fragility-and-crisis-management_en#_ftnref1 (Resilience and Fragility)

[21] EUROPEAN COMMISSION, ECONOMIC RESILIENCE IN EMU, Brussels, 13/9/2017, P2

[22] EUROPEAN COMMISSION, ECONOMIC RESILIENCE IN EMU, Brussels, 13/9/2017, P3

[23] Abdul Moneim, H. 2012: The performance of Arab economies during the past two decades. Arab Monetary Fund, United Arab Emirates p. 3.

[24]https://www.imf.org/en/About/Factsheets/Sheets/2016/07/27/15/22/How-the-IMF-Promotes-Global-Economic-Stability (How the IMF Promotes Global Economic Stability)

[25] Abdul Moneim, H. 2012: The performance of Arab economies during the past two decades. Arab Monetary Fund, United Arab Emirates p. 3.

[26] https://www.coursehero.com/file/43468351/ECO-3-assdocx/ (Managerial EconomicsDr. Maximo S. Artieda)

[27] Hamlaoui, a. 2014: The Role of International Financial Institutions in Economic Stability, Mohammed Khedr University-Biskra, Algeria. Pp. 47, p. 48.

[28] https://www.coursehero.com/file/43468351/ECO-3-assdocx/ (Managerial EconomicsDr. Maximo S. Artieda)

[29] https://www.coursehero.com/file/43468351/ECO-3-assdocx/ (Managerial EconomicsDr. Maximo S. Artieda)

[30] https://www.economicshelp.org/blog/10189/economics/key-measures-economic-performance/ (Key measures of economic performance)

[31] Range of Fragility (0.0 less fragile – 120.0 more fragile), the source of Arab countries data are from the FIS database (https://fragilestatesindex.org/excel/) except Palestine data calculated by the researcher

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المركز الديمقراطى العربى

المركز الديمقراطي العربي مؤسسة مستقلة تعمل فى اطار البحث العلمى والتحليلى فى القضايا الاستراتيجية والسياسية والاقتصادية، ويهدف بشكل اساسى الى دراسة القضايا العربية وانماط التفاعل بين الدول العربية حكومات وشعوبا ومنظمات غير حكومية.

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