São Paulo – The Palestinian economy is facing increasing risks, especially due to a decline in the Gross Domestic Product (GDP) of the West Bank. So says a report on the region published this Thursday (15th) by the International Monetary Fund (IMF). The study points out that the West Bank posted strong growth from 2008 to 2010 thanks to the easing of Israeli barriers and to international aid. In 2011, however, the drop in revenues from donations caused the GDP to grow at a lower rate: from 8% in 2010 to 4% in the first half of 2011. The unemployment rate has remained at 16% since mid-2010.
“The slowdown is due to continued fiscal retrenchment, declining aid (especially from regional donors) and a consequent liquidity crisis, as well as slower easing of Israeli restrictions over the past year,” says the report. According to the Palestinian Monetary Authority, the region’s GDP is US$ 5.6 billion.
While the West Bank sees a reduction in economic activity, the IMF notes that there has been a modest improvement in indicators concerning the West Bank, which is economically less developed than the other territory evaluated by the IMF. The survey shows that the West bank’s GDP grew by nearly 28% in the first half of this year. To the IMF economists, this was possible because since mid-2010, certain restrictions on product imports have been eased. The unemployment rate dropped from 37% in 2010 to 28% in the first half of this year.
The IMF advises on the West Bank and Gaza Strip territories to be less dependent on foreign aid. According to the fund, by late August this year, US$ 400 million had been disbursed in foreign donations to Palestine. By the end of August 2010, US$ 700 million had been donated.
The IMF recommends that the Palestinian National Authority (PNA) promotes a wide-ranging spending cut and sets spending priorities, halting and transferring non-priority projects. The institution advises the PNA to work to increase tax collection. “Development and community
projects should only be implemented if there are matching donor funds,” claims the IMF. The institution underscores, however, that the economic performance of the Palestinian territories is directly dependent on the restrictions and barriers imposed by Israel.
The IMF makes the recommendations on economic guidelines that the Palestinian Authority should adopt because as announced in April, it considers that the latter has the autonomy and ability to conduct the economic policies of a future Palestinian state.
This report, entitled “Recent Experience and Prospects of the Economy of the West Bank and Gaza,” was issued a few days prior to the PNA’s submitting a request for the United Nations to recognize the Palestinian State. The UN Security Council will vote on it first. The United States are threatening to veto the request. The creation of the Palestinian State may also be submitted to the General Assembly, which will be opened by the Brazilian president, Dilma Rousseff.
Brazil recognized the Palestinian State last year, during Luiz Inácio Lula da Silva’s administration, and was soon followed by other Latin American countries. Dilma will make the opening address of the Assembly next Wednesday (21st).
*Translated by Gabriel Pomerancblum
