The World Bank’s latest report on the Palestinian economy warns that a severe fiscal crisis will deepen if the recent decline in donor assistance continues and that the current situation is “jeopardising gains” made in recent years in building strong institutions.
The World Bank published its Economic Monitoring Report yesterday, a document prepared twice a year to inform the Ad Hoc Liaison Committee (AHLC), a forum of donors to the Palestinian Authority. The AHLC is due to meet in Brussels on March 21 to discuss the document. The report analyses the state of the Palestinian economy and the PA’s fiscal position.
According to the report, while the Palestinian economy continues to grow, indications of sustainable growth remain absent. In the West Bank growth slowed in 2011 compared to the previous year. In addition to the decline in donor support and the fiscal crisis, the slowdown in growth, according to the report, is in part due to Israel’s restrictions, preventing the free flow of commercial traffic and goods.
In Gaza, the report shows that the economy continued to recover in 2011, experiencing double-digit GDP growth. Much of this growth, however, stems from a construction boom produced by increased aid inflows, the lifting of Israeli restrictions on the entry of some raw materials and increased imports through the tunnels from Egypt. In addition, the Gazan economy is still rebounding from a very low base, with the average Gazan remaining “worse off than s/he was in the late nineties.”
Overall, the report concludes that growth in the Palestinian territories will remain highly aid-dependent unless the Palestinian private sector has the necessary room to grow.