Palestinians Blame COVID-19 for Spike in Consumer Goods Prices
The local economy in the West Bank is suffering from the same scarcity of products and increased demand that has affected the global economy
COVID-19 has wreaked havoc on the Palestinian health sector, with many hospitals at full capacity, and over-worked health care staff on the verge of collapse from exhaustion.
With hundreds of registered cases every day, Palestinian Authority government officials say they are not ready yet to fully reopen.
That has led to more misery in the local economy, which is already in tatters.
A deteriorating economic situation existed in the Palestinian territories before the start of the global pandemic, but conditions have worsened with the persistent COVID-19 pandemic, and a sharp increase in the prices of basic commodities is being blamed on the spike in cases of the coronavirus.
The coronavirus has significantly affected the poor and middle classes, the two segments of the population that have suffered the most economically.
Thabit Abo Al Ros, a financial expert and a lecturer at Palestine Technical University in Tulkarem, in the northwestern West Bank, told The Media Line that prices began to rise six months ago, especially for basic commodities.
“Price hikes came due to the corona pandemic,” he explained. “This rise affected the poor Palestinian family, whose sources of income did not increase. What is happening will add a new burden and will negatively affect the lives of Palestinians.”
The Palestinian economy is heavily dependent on international aid, and on taxes collected by the Palestinian Authority from its citizens, but neither of those sources has been very forthcoming due to the deadly pandemic that brought the world and Palestinian economies to a standstill.
I do not see that the Palestinian Authority can contribute directly to the relief of the citizens, as its financial potential is modest
The PA needs help itself as it only pays the salaries of its employees intermittently and most of the time not in full. It relies heavily on outside aid and is borrowing from local banks to stay afloat.
“I do not see that the Palestinian Authority can contribute directly to the relief of the citizens, as its financial potential is modest,” Abo Al Ros said.
Mohammad Abdallah Khabeisa, a leading Palestinian financial reporter, told The Media Line that prices increased by 5%-10% beginning during the first quarter of this year, compared to the first quarter of 2020.
“After the markets opened up, we noticed an increase in prices with increased demand,” Khabeisa said.
He says high prices can be blamed on several factors.
“In part, it’s related to the Israeli occupation, that oversees its economic and political policies, as one of the main causes of the crises experienced by this society,” Khabeisa said, adding that the Palestinian economy is highly dependent on the Israeli economy. “For example, if there are Israeli-produced goods, such as livestock, that can be imported at a lower price, Palestinians are forced to buy the Israeli product as per agreement,” he said.
Khabeisa says that repercussions on the global economy as a result of steps taken to contain the coronavirus have created problems for the transportation of goods around the world.
“Production chains from producing countries like China to the Middle East have been affected, leading to shipping costs for most goods to increase, and this had an impact on prices,” he said.
The commodities most affected by the increase in prices are cooking oils, timber, plastics and building materials such as iron, which has risen sharply on a global level.
The Palestinian market depends heavily on imported goods, Khabeisa says, and despite being a “small economy and market” compared to other economies and markets, it was still affected like other, larger economies by the pandemic.
There are fewer work opportunities and more workers fighting for limited jobs. I have five kids waiting for me at home. I need to feed them and take care of them
The impact of the coronavirus on Palestinians has been tremendous; many businesses have shut down, and others that were able to stay open have downsized to survive. In addition, many workers took pay cuts and worked for less money in order to provide for their families.
Rebhi Khalaf, a construction worker, told The Media Line that he agreed to work for less pay because he has no other choice.
“There are fewer work opportunities and more workers fighting for limited jobs. I have five kids waiting for me at home. I need to feed them and take care of them,” he said.
“There was no change in the wages of employees and workers, in fact in some cases they went down, while prices rose,” according to Khabeisa.
Aside from international aid, the Palestinian economy depends on two sectors – service and tourism – to inject much-needed cash, and they are still hurting from the pandemic.
“So far, the services and tourism sectors have not recovered, and this has negative repercussions,” explained Khabeisa, adding that government is “paralyzed,” and its policies have been ineffective.
“There are no serious steps to be taken by the PA government to help the citizens and support some basic commodities such as fuel, bread, grains, sugar, meat and vegetable oils,” he said.
About one-third of the Palestinian population lives in poverty, according to the Palestinian Central Bureau of Statistics (PCBS), of which more than 15% are classified as living in absolute poverty – and this is expected to rise. Unemployment stands at 26.4% in the second quarter of 2021, with thousands of new university graduates idle.
The Palestinian Authority “has one of the world’s highest prices of gas globally. For example, the price of a kilo of bread is one dollar and forty cents, compared to forty-five cents in neighboring Jordan,” Khabeisa said.
There are five million Palestinians living in the West Bank and Gaza, according to the last census.
Abu Zaid Al-Nabali, vice chairman of the Chamber of Commerce for Ramallah and Al-Bireh Governorate in the West Bank, has owned a major car dealership since 1989, in addition to other businesses. His car dealership’s sales were greatly affected by the pandemic.
Nabali summarizes the economic situation in Palestine in one word: “catastrophic.”
He told The Media Line that he was forced to take out a loan to pay for expenses.
“Palestine is part of the world and what happened around the world affected our economy as much it affected them. Palestine is not isolated from the world,” Nabali said.
“There’s no doubt that there is a decline in demand for the car market. The prices of luxury goods such as clothes and shoes have decreased due to people’s reluctance to buy them, while the prices of basic commodities such as cereals, flour and oil increased,” Khabeisa pointed out.
Most of Nabali’s cars come from the United States, Germany and South Korea. He says that car prices have skyrocketed, and sales have decreased.
“New cars do not exist and used cars have increased in price several times. I can no longer import cars as I need” due to their scarcity, he said.
The decrease in production capacity in factories and the rise in freight rates have had a direct impact on all commercial sectors. Shipping rates have sometimes gone up ten-fold.
“We used to import a container from China that cost us $2000, now the cost is $20,000,” Nabali said.
Nabali says that people’s mindsets have changed their spending habits and they have become more protective of their money as the price of cars in some cases has increased upward of 40%.
“Not many people are interested in buying a car. Owning a car is no longer a priority. They use public transportation, or even walk to save. The crisis forced everyone to save and preserve cash and liquidity in the event of closures or if things became more severe,” he said.
And with the continued restrictions on the movement of people because of the number of rising COVID-19 cases, Nabali says, “no one finds the need to buy a car. Most people cannot afford to buy cars.”
Nabali does not favor closures and demands a balance between the economy and health, calling on everyone to get vaccinated.
“If there is no return to normal life as it was before corona soon, and government aid and programs to mitigate (coronavirus’ effects), then we are heading toward the unknown,” Nabali said. He doesn’t openly blame the PA, but he does say that the government has “no clear plans or programs for dealing with merchants. The financial situation of the Authority is weak and depends on foreign aid.”
Many observers expect that things will not improve until the summer of 2022.
Abo Al Ros has a gloomy outlook for Palestinian consumers.
“The coming weeks and months will witness a major setback in the quantity and availability of goods in markets coupled with a significant increase in prices,” he said.