Economy of the Palestinian territories
|Economy of Palestine|
Bank of Palestine, Ramallah
|Currency||New Israeli Shekel (NIS) alongside:
- American Dollar (USD)
- Jordanian Dinar (JOD)
|Fiscal year||Calendar Year|
|GDP||$10 billion (2012 est.)|
|GDP growth||5.9% (2012)|
|GDP per capita||
$1924 (West Bank)$876 (Gaza) 
|GDP by sector||agriculture (5%), industry (14%), services (81%) (2008 est.)|
|Inflation (CPI)||2.7% (June 2013)|
below poverty line
|25.8% (2011 est.) |
|Labour force||1.137 million (2012)|
|Agriculture (12%), Industry (23%), Services (65%) (2008 est.)|
|Unemployment||27.5% (Q1 2013)|
|Main industries||Cement, Quarrying, Textiles, Soap, Olive-Wood Carvings, Mother-of-Pearl Souvenirs, Food Processing|
|Ease of doing business rank||135th|
|Exports||$720 million (2011)|
|Export goods||Olives, Fruit, Vegetables, Limestone, Citrus, Flowers, Textiles|
|Imports||$4.2 billion (2011)|
|Import goods||Food, Consumer Goods, Construction Materials|
|Public debt||$4.2 billion (June 2013)|
|Budget deficit||$1.3 billion (13% of GDP; 2012 est.)|
|Revenues||$2.2 billion (2012 est.)|
|Expenses||$3.54 billion (2012)|
|All values, unless otherwise stated, are in US dollars|
GDP per capita in the Palestinian territories rose by 7% per year from 1968-1980 but slowed during the 1980s. Between 1970 and 1991 life expectancy rose from 56 to 66 years, infant mortality per 1,000 fell from 95 to 42, the percentage of households with electricity rose from 30% to 85%, the percentage of households with safe water rose from 15% to 90%, the percentage of households with a refrigerator rose from 11% to 85%, and the percentage of households with a washing machine rose from 23% in 1980 to 61% in 1991.
Economic conditions in the West Bank and Gaza, where economic activity was governed by the Paris Economic Protocol of April 1994 between Israel and the Palestinian Authority, deteriorated in the early 1990s. Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined 36.1% between 1992 and 1996 owing to the combined effect of falling aggregate incomes and robust population growth. The downturn in economic activity was due to extensive corruption in the newly governing Palestinian Authority, and to Israeli closure policies in response to security incidents in Israel, which disrupted previously established labor and commodity market relationships. The most serious effect was the emergence of chronic unemployment. Average unemployment rates in the 1980s were generally under 5%; by the mid-1990s this level had risen to over 20%. After 1997, Israel's use of comprehensive closures decreased and new policies were implemented. In October 1999, Israel permitted the opening of a safe passage between the West Bank and the Gaza Strip in accordance with the 1995 Interim Agreement. These changes in the conduct of economic activity fueled a moderate economic recovery in 1998-99.
As a result of the Israeli blockade, 85 percent of factories were shut or operated at less than 20 percent capacity. It is estimated that Israeli businesses lost $2 million a day from the closing while Gaza lost approximately $1 million a day. The World Bank estimates the nominal GDP of the territories at 4,007,000 US$ and of Israel at 161,822,000 US$. Per capita these numbers are respectively 1,036 US$ and 22,563 US$ per year.
For 30 years, Israel permitted thousands of Palestinians to enter the country each day to work in construction, agriculture and other blue-collar jobs. Until the mid-1990s, up to 150,000 people—about a fifth of the Palestinian labor force—entered Israel each day. After Palestinians unleashed a wave of suicide bombings, the idea of separation from the Palestinians took root in Israel. Israel found itself starved for labor, and gradually replaced most of the Palestinians with migrants from Thailand, Romania and elsewhere.
In 2005, the PNA Ministry of Finance cited the Israeli West Bank barrier, whose construction began in the second half of 2002, as one reason for the depressed Palestinian economic activity. Real GDP growth in the West Bank declined substantially in 2000, 2001, and 2002, and increased modestly in 2003 and 2004. The World Bank attributed the modest economic growth since 2003 to "diminished levels of violence, fewer curfews, and more predictable (albeit still intense) closures, as well as adaptation by Palestinian business to the contours of a constrained West Bank economy". Under a "disengagement scenario" the Bank predicted a real growth rate of -0.2% in 2006 and -0.6% in 2007.
In the wake of Israel's unilateral disengagement from Gaza, there were shortages of bread and basic supplies due to closure of the al Mentar/Karni border-crossing into Israel. Israel's offer to open other crossings was turned down by the Hamas-run Palestinian authority.
Following the January 2006 legislative elections, won by Hamas, the Quartet (apart from Russia) cut all funds to the Palestinian Authority led by prime minister Ismail Haniyah (Hamas). The Palestinian Authority had a monthly cash deficit of $60 million-$70 million after it received $50 million-$55 million a month from Israel in taxes and customs duties collected by Israeli officials at the borders. After the elections, the Palestinian stock market fell about 20 percent, and the Palestinian Authority exhausted its borrowing capacity with local banks. Israel ceased transferring $55 million in tax receipts to the Palestinian Authority. These funds accounted for a third of the PA's budget and paid the wages of 160,000 Palestinian civil servants (among them 60 000 security and police officers). The United States and the European Union halted direct aid to the PA, while the US imposed a financial blockade on PA's banks, impeding some of the Arab League's funds (e.g. Saudi Arabia and Qatar) from being transferred. In May 2006, hundreds of Palestinians demonstrated in Gaza and the West Bank demanding payment of their wages. Tension between Hamas and Fatah rose as a result of this "economic squeeze" on the PA.
In 2009, the Israeli military removed its checkpoint at the entrance of Jenin in a series of reductions in security measures. In September 2012 EU activists stated that the Palestinian economy "lost access to 40 percent of the West Bank, 82 percent of its groundwater and more than two-thirds of its grazing land" due to the occupation and settlement construction.
The first planned Palestinian city named Rawabi is under construction north of Ramallah, with the help of funds from Qatar. In 2013, commercial trade between Israel and the Palestinian territories were valued at US$ 20 billion annually.
In 2007, the economy in the West Bank improved gradually. Economic growth for the occupied areas reached about 4-5% and unemployment dropped about 3%. Israeli figures indicated that wages in the West Bank rose more than 20% in 2008 and trade rose about 35%. Tourism in Bethlehem increased to about twice its previous levels, and tourism increased by 50% in Jericho. Life expectancy is 73.4, placing the territories 77th in the world, compared with a life expectancy of 72.5 in Jordan, and 71.8 in Turkey. Car sales in 2008 were double those of 2007. The International Monetary Fund report for the West Bank forecast a 7 percent growth rate for 2009.
In 2009, efforts continued to build Palestinian local institutions and governments from the ground up. Much of this work was done by Tony Blair and U.S. General Keith Dayton. Some analysts saw this as a more substantial way to lay a groundwork for viable institutions and for local peace. In August 2009, a state of the art web-based system for tracking goods coming in and out of the area by Palestinian customs was launched in partnership with the United Nations Conference on Trade and Development.
In 2009, an economic "boom" began with growth reaching 8 percent, higher than in Israel or the West. However, with inflation around 9.9% that same year, real economic growth is actually negative insofar as purchasing power has decreased. Tourism to Bethlehem, which had doubled to 1 million in 2008, rose to nearly 1.5 million in 2009. New car imports increased by 44 percent. New shopping malls opened in Jenin and Nablus. As an outcome of the Palestine Investment Conference, Palestinian developers are planning to build the first modern Palestinian city, Rawabi.
East Jerusalem was once the business and shopping hub of the West Bank. However since the advent of Israeli security checkpoints and the separation barrier starting over a decade ago, it has become isolated from its customer base leading to serious economic decline. According to Hanna Siniora of the Palestinian-American Chamber of Commerce, the turning point was 1993. He states that since then East Jerusalem has become a closed city through isolation from the rest of the West Bank causing a loss of 50% of its business between 1993 and 2001.
According to a 2012 report by the Association for Civil Rights in Israel and interviews conducted by the Forward, the decline of the economy in East Jerusalem has led to unprecedented levels of poverty, with 80% of the Palestinian population living below the poverty line. The main cause is seen as the political and physical barriers separating it from the rest of the West Bank. The ACRI report attributing the problem to “‘the cumulative effects of annexation, neglect, rights violations and the completion of the separation barrier.” Another contributing factor to the economic decline is the housing situation. The Israeli government has facilitated extensive construction for Jewish only neighborhoods, but has severely restricted development and building for the Palestinian population.
In 2013, commercial trade between Israel and the Palestinian territories were valued at US$ 20 billion annually.
According to Hamas, Israel's closure policy, which was extended when the Hamas administration come to power in 2007, was responsible for high levels of poverty and unemployment and a significant decline of the private sector which was heavily reliant upon export markets. Israel blamed Hamas for taking actions that led to the closure policy. A large part of the population is dependent on humanitarian assistance, primarily from the UN agencies.
An easing of Israel's closure policy in 2010 resulted in an improvement in some economic indicators, but regular exports from the Gaza Strip were still prohibited. According to the Israeli Defense Forces, the economy improved in 2011, with a drop in unemployment and an increase in GDP. New malls have opened, local industry is developing and the economic upswing has led to the construction of hotels and a rise in the import of cars. Wide-scale development has been made possible by the unhindered movement of goods into Gaza through the Kerem Shalom Crossing and tunnels between the Gaza Strip and Egypt. The current rate of trucks entering Gaza through Kerem Shalom is 250 trucks per day. This figure fluctuates dependent on the level of interference with goods being brought into Gaza from Egypt through tunnels. The increase in building activity has led to a shortage of construction workers. To make up for the deficit, young people are being sent to learn the trade in Turkey.
Stonecutting is a traditional source of income for the Palestinian economy. The annual average output per worker in the stone industry is higher than in any other sector. There are 650 stone production outlets in the West Bank, 138 of them in Beit Fajjar. The quarried material is cut into a rich range of pink, sand, golden, and off-white bricks and tiles known as Jerusalem stone.
In 2008, the West Bank and Gaza economies were heavily reliant on foreign aid which stood at 1.8 billion. Approximately 30% of the GDP, or US$487 per Palestinian per year came from aid. Foreign aid provided essential services for nearly half of the Palestinian people, and allowed the Palestinian Authority to operate and pay its estimated 140,000 employees.
In 2010, Arab states cut financial aid to the Palestinian Authority. According to the Palestinian Finance Ministry, the PA received $583.5 million in budget support by August 2010, of which only 22 percent came from Arab states. The remainder was from international donors, including the European Union and the United States. Salah Rafat, a member of the PLO Executive Committee, urged the Arab countries to honor their financial pledges.
Rejection of 2013 economic incentives
As part of the US Government's attempt to create a peace agreement between Israelis and Palestinians, US Secretary of State John Kerry unveiled a $4 billion plan that would help grow the Palestinian economy by 50 percent and bring "unprecedented wealth to the region". The plan was coordinated in conjunction with former UK Prime Minister, Tony Blair. However, the following day after Kerry announced his initiative, the Palestinian Authority rejected the deal saying it won't "make political compromises for financial benefits." The Palestinian Authority's Economic Advisor, Mohammad Mustafa, said "PA’s priorities are not economic, but rather a political framework for the creation of Palestinian state based on the 1967 lines, with East Jerusalem as its capital, that also ensures the rights of refugees and a political compromise, the Palestinian news agency added."
Joint economic cooperation between Israelis and Palestinians officials is growing. Starting in 2008, Cisco Systems began a concerted effort to jump-start the nascent Palestinian IT sector with a holistic ecosystem approach, encompassing venture capital, private equity, capacity building and direct outsourcing to Palestinian companies. The company invested $15 million toward that end and drew in other major international investors and donors, including Microsoft, HP and Google. The Palestinian IT sector has since grown from 0.8% of GDP in 2008 to 5% in 2010.
Olives of Peace is a joint Israeli-Palestinian business venture to sell olive oil. Through this project, Israelis and Palestinians have carried out joint training sessions and planning. The oil is sold under the brand name "Olives of Peace." 
In October 2009, a new project got underway promoting tourism and travel between the two areas. New business efforts and tourist attractions have been initiated in Jenin. The two regions are planning a joint industrial zone which would bridge the border. Palestinians would produce locally-made handicrafts and sell them through Gilboa to other regions of the world. Another possible project is a joint language center, where Israelis and Palestinians would teach each other Arabic and Hebrew, as well as aspects of their cultural heritage. 
Since 2010, Israeli high-tech companies have begun to employ Palestinian engineers. To date, most of them are outsourced workers, but Mellanox, a computer hardware firm, plans to hire 15-20 Palestinian engineers as regular employees.
In 2011, bilateral trade between Israel and the Palestinian-ruled areas reached $4.3 billion, with Israeli exports to the PA amounting to $3.5 billion and Palestinian exports to Israel amounting to $816 million. According to Nader Tamimi, chair of the Association of Traditional Industries in the PA, there are regular interactions between Palestinian and Israeli businessmen.
At a conference hosted by the Faculty of Business and Management at Ben-Gurion University of the Negev in 2012, Israeli and Palestinian trade experts met to discuss ways of promoting cross-border business interactions.
In 2013, commercial trade between Israel and the Palestinian territories were valued at US$ 20 billion annually. The continuously increasing transactions led to the creation of the joint Palestinian and Israeli initiative, the Jerusalem Arbitration Center (JAC). The center will specialize as an independent institution focusing on business arbitration between Israelis and Palestinians.
- Blockade of the Gaza Strip
- Taxation in the Palestinian territories
- Transport in the Palestinian territories
- Communications in the Palestinian territories
- CIA World Fact Book - Gaza's Economy
- CIA World Fact Book - West Bank's Economy
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- World Bank Report P. 15
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- New Palestinian city to be built
- Israeli-Palestinian business arbitration center established
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- United Nations World Population Prospects: 2006 revision – Table A.17 for 2005-2010
- Building Palestine from the bottom up, by Shlomo Avineri, Welt Online, 5/18/09.
- New Customs System
- Qatari Diar CEO signs development partnership at Palestine Investment Conference in Bethlehem AMEinfo.com, May 22, 2008
- Construction begins on Rawabi, the first Palestinian planned city, AMEinfo.com, January 05, 2010
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- Fayyad seeks $5 billion to develop new Palestinian state infrastructure
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- Economic improvement in the Gaza Strip
- Egypt's holy war against Sinai jihadists leaves many questions unanswered
- Palestinians' stones cut both ways
- Palestinian Workers Rights
- Arab states cut aid to the PA
- PA rejects help
- Cisco Pioneers Market Development Approach in Palestine, Mission Measurement, June 2012
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- Israeli Palestinian business center
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- MEED - Middle East Business intelligence since 1957