São Paulo – The economic growth of Palestine hinges on progress in peace talks with Israel. So says a report released this week by the International Monetary Fund (IMF). According to the report, the economy of the West Bank and Gaza grew by approximately 1.5% in 2013, a “weak” performance which reflects the “impact of uncertainty regarding the Israeli-Palestinian peace process and a sharp deterioration of economic conditions in Gaza.” The peace talks are conducted by the United Nations, Russia, the United States and the European Union.
The document has been released following a visit from an IMF mission to the occupied territories, from January 28th through February 6th. The head of the IMF mission, Christoph Duenwald, states in the report that the economic outlook for Palestine in 2014 is dependent upon the peace talks. In the current scenario, the IMF predicts that the Gross Domestic Product (GDP) should be up 2.5% in 2014, but unemployment should remain high. As of late 2013, 25% of the economically active population was jobless.
In 2013, Palestine received more donations from abroad, cut down its outstanding debt towards commercial banks, and saw a 3% decline in fiscal deficit over 2012. The Palestinian deficit was equivalent to 13.7% of the GDP last year.
The IMF advised Palestinian authorities to limit wage bill increases and reduce subsidies to fuel purchases. According to the document, there is room for taxes to increase, and Palestine needs to eliminate tax holidays “urgently.”
As per the IMF mission’s assessment, Palestinian authorities must implement structural economic reforms so that the country can harness funds and investment in the best possible way, in case talks with Israel do move forward.
“If peace talks do not succeed, the outlook could worsen and a new financing model—aimed at lower deficits and a change in the composition of spending in favor of development—would be urgently needed. In either case, support from the international community and broad-based and comprehensive easing of Israeli restrictions will be needed to underpin the Palestinian reform efforts,” the document reads.
*Translated by Gabriel Pomerancblum
