The Palestinian Authority had a $1.7 billion deficit in 2012 as economic growth
dropped and unemployment rose, according to a World Bank report published
Tuesday in advance of a March 19 international donor conference in
The report warned that the situation would only worsen in 2013
if the Israeli-Palestinian conflict continued and if better business practices
were not put in place.
It particular, it noted that the manufacturing
sector needs to grow and expand into higher value-added items, such as
technology and pharmaceuticals.
Palestinians must also send products to a
much wider list of countries, rather than depending almost entirely on Israel to
be their main trading partner.
In 2011, according to the report, 86
percent of Palestinian exports went to Israel.
support by the donor community, and increased reform efforts by the PA to manage
the current fiscal challenges must remain a high priority,” said Mariam Sherman,
World Bank Country Director for the West Bank and Gaza.
bolder efforts to create the basis for a viable economy need to be made to
prevent the continued deterioration that will have lasting and costly
implications for economic competitiveness and social cohesion,” she
The report, titled Fiscal Challenges and Long Term Economic Costs,
had harsh words to say about Israeli restrictions and the absence of a peaceful
The continued existence of a system of closures and
restrictions is creating lasting damage to economic competitiveness in the PA
territories, according to the report.
Donors have focused on keeping the
PA solvent, but the economy will only thrive if long-term issues are
But not all the problems would disappear if the
Israeli-Palestinian conflict was resolved, the report said.
substitute for a poor business environment,” the report said.
of a small economy depends to a large extent on its capacity to compete in
global markets and increase the exports of goods and services,” the report
It warned that the Palestinian economy was losing this ability,
because its manufacturing sector was stagnant.
“The rapid decline in
manufacturing has not been replaced by the growth of high value added service
exports such as Information Technology (IT) services and tourism,” the report
Agricultural employment has doubled, but Palestinians do not grow
enough food to provide for their population in the West Bank and Gaza, and as a
result must import food, according to the report.
are based on natural resources, with low value added, such as stone, ceramics
and low-end furniture, the report said.
Exports of goods make up only 7%
of the Palestinian economy in 2007, compared with 10% in 1996, according to the
“This figure is among the lowest in the world,” the report
These exports are mostly lowvalue products, as opposed to
technologically advanced ones, the report said.
According to the report
real GDP growth for the first three quarters of 2012 dropped to 6.1% from 11% in
2011 and 2010. Similarly the Gaza GDP dropped from 15% in 2010 and 2011 to 7.7%
in the first three quarters of 2012, according to the report.
Bank blamed the West Bank drop on Israeli restrictions, a shortfall in donor
aid, uncertainty created by the PA’s fiscal crisis and the global economic
slowdown, including in Israel, the report stated.
The Gaza economy slowed
down because agriculture and fishing have declined and the rebound effect has
waned, the report said.
The World Bank estimates that end-of-the-year
figures for 2012 will not change, and that economic growth will continue to slow
down in 2013.
The GDP in 2013 is expected to slow to 4.7% in the West
Bank and 6% in Gaza, according to the report.
Unemployment increased by
2% in 2012, according to the report, standing at 18.3% in the West Bank in 2012
and at 32.2% in Gaza.
“[The] Gaza unemployment rate continues to be among
the highest in the world,” said the report.
It warned that the
unemployment rate would continue rise.
The private sector cannot generate
enough job opportunities for the increasing population, it said. The PA’s fiscal
crisis means that public sectors jobs are likely to decrease. In Gaza, 38% of
jobs are in this sector, compared to 16.3% in the West Bank.
according to the report, continues to have higher- than-expected costs and