World Bank: Palestinian economy will likely remain stagnant due to Israeli restrictions of movement.
By JERUSALEM POST STAFFpalestinian economy 88 2(photo credit: Ariel Jerozlimski)
The Palestinian economy will likely remain stagnant in 2008, largely due continued Israeli restrictions on Palestinian movement, and despite serious Palestinian reform efforts and massive foreign aid, the World Bank said in a report Sunday.
In December, donor countries pledged $7.7 over three years to help fund a three-year Palestinian reform and development plan.
However, the bank said that "the private sector revival required for a virtuous cycle of growth has not been realized due to the continued restrictions on movement and access."
Earlier in the week, the International Monetary Fund warned that it appears increasingly likely that the Israeli restrictions will remain in place, and that in such a scenario, the Palestinian economy would contract, instead of grow. This would make it increasingly difficult to cover the Palestinian government's deficit with aid.
The World Bank had predicted double-digit economic growth, provided Israel, the Palestinian government and the donors do their part. However, the Gross Domestic Product is only expected to grow by 3 percent in 2008, accord to the revised prediction. "That, taking into account population growth, leaves per capita income static, if not lower than the previous year," the report said.
The bank noted that the Gaza economy has sharply contracted because of the virtual closure of the strip by Israel and Egypt after the violent Hamas takeover there last year. However, even in the West Bank, GDP growth was only modest, the bank said.
On Friday, the International Monetary Fund had issued its quarterly review of the Palestinian development and reform plan. The IMF said the Palestinian government in the West Bank has made "significant strides" toward reducing its huge budget deficit of 27 percent of the GDP, but that international donors need to transfer an additional $400 million to close the spending gap in 2008.
However, the report warned that without Israel easing movement restrictions, the Palestinian economy would contract. In recent weeks, Israel has removed some obstacles to movement in the West Bank, but the report, citing UN figures, said that as of March, the overall number of obstacles had increased.
David Baker, a Prime Minister's Office spokesman, would not comment directly on the IMF report. However, he said that "the roadblocks and checkpoints are subject to prevailing security conditions on the ground."
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