Israeli conflict, divisions continue to constrain Palestinian economy

Sunday 04/09/2016
Gloomy picture of growth prospects

WASHINGTON - The conflict with Israel, the blockade on Gaza and internal political infighting have severely constrained the Palestinian economy, according to an International Monetary Fund report released Wednesday.
Palestinian gross domestic product (GDP) per capita would be between 37 percent and 130 percent higher were it not for political issues, the IMF said, using three different economic models to assess the impact.
"Absent the political uncertainty and restrictions of the past 20 years, real GDP per capita would have been significantly higher in the West Bank and Gaza," the report said.
It predicted the Palestinian economy would grow by 3.3 percent in 2016, compared with 3.5 percent last year.
The findings echo a Tuesday report from the United Nations, which found the Palestinian economy could double without Israel's occupation of the West Bank and blockade on Gaza.
Israel occupied the West Bank in 1967 in a move never recognised by the international community.
It has also fought three wars in Gaza against Hamas and other Palestinian groups since 2008 and maintains a blockade on the enclave.
The IMF report painted a gloomy picture of growth prospects, saying unemployment reached 26.9 percent across the Palestinian territories by the end of June, up 2 percentage points on the previous year.
In Gaza, the unemployment rate is over 40 percent, with close to two thirds of young people without jobs.
"Political and security uncertainties weigh heavily on the prospects for growth," it said.
"Israeli restrictions and continued (Israeli) settlement expansion impede economic activity and exacerbate social hardships," it said, adding that Hamas's control of Gaza and divisions between Palestinian factions were also hindering reconstruction.
The 2014 Gaza war killed more than 2,200 Palestinians and 73 people on the Israeli side, while causing economic losses close to three times the size of Gaza's GDP.
The Palestinian economy is heavily dependent on international aid, though funding has been declining and could fall by 25 percent this year, the report said. Further cuts could lead to a "vicious cycle of political and fiscal risks."
Only a "political breakthrough" could lead to "fundamental improvement in the outlook," it added, though it called such an occurrence "unlikely."
The report said the Palestinian Authority, which runs the West Bank, should focus on developing a longer-term fiscal plan for the economy.

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