Now the Palestinians will urgently need outside help to overcome a poor economic outlook and a widening budget deficit worsened by the Covid-19 pandemic, according to the World Bank.
Already facing a growth slowdown and sizeable deficit, the West Bank and Gaza Strip could see output shrink between 7.6% and 11%, the World Bank said on Monday.
President Mahmoud Abbas’s Palestinian Authority (PA) may watch its fiscal gap roughly double to more than $1.5bn this year, and will need significant aid to restore growth and solve budgetary issues.
Israel’s restrictions stifle much of Palestinian economic life. It controls every access point, which enables it to oversee all imports and exports. It creates bureaucratic hurdles that Palestinians say kill entrepreneurship.
The widespread control on the movement of people and goods; destruction of water sources, homes, and other assets; and the expansion of Israeli settlements perpetuate the economic crisis in West Bank and the Gaza strip, according to a United Nations Conference on Trade and Development (UNCTAD) report in September 2016.
“Without occupation, the economy of the Occupied Palestinian Territory could produce twice the GDP it currently generates,” the report said.
Palestinian economic output could jump as high as 35% if the biggest chunk of West Bank territory were opened for development, the World Bank said in 2013. The 2016 UNCTAD report also pointed to the dire impact of Israel’s unjustified grip over the land designated as “Area C” in the 1993 Oslo peace accords, which covers 61% of the West Bank and 66% of its grazing land.
“It is estimated that the occupation of Area C costs the Palestinian economy the equivalent of 35% of GDP” ($4.4bn in 2015), according to UNCTAD.
After Palestinian economic expansion cooled from 8.9% in 2016 to just 0.9% last year, the pandemic has now forced World Bank officials to cut their 2020 expectations from a previous 2.5% increase. Restraints on movement helped to contain the spread of the disease but also hurt activity and government revenue.
Poverty in the occupied West Bank may double, the World Bank has warned, just weeks before Israel aims to kick-start plans to annex parts of the territory.
The fallout is expected to see the number of households living below the poverty line rise this year from 14% to 30% in the West Bank, largely due to Palestinians being unable to cross into Israel for work.
The poverty rate was already 53% in Gaza before the pandemic and the World Bank forecast it would jump to 64% this year. The Palestinian government relies heavily on donor support to function.
Despite the increased financial needs, support for this year’s PA budget is the lowest in two decades, according to the World Bank.
The office of the UN’s special Middle East envoy called for “vast resources” to be deployed by the Palestinian and Israeli governments, as well as by foreign donors and the private sector, in response to the pandemic.
While humanitarian and development aid remains important, the US said, “different and bolder action is required to avert economic collapse.”
