Economy of the State of Palestine

The Palestinian economy refers to the economy of the Palestinian territories, including the West Bank, East Jerusalem and the Gaza strip. According to the CIA World Factbook, 60% of the Gaza strip population is under the poverty line. The World Bank has compared the 2001-2002 recession brought about by the Second Intifada and the blockade of access points by Israel to the 1929 economic crisis. The UN institution underlines that unemployment, which was estimated to 23% in 2005, would increase to 39% in 2006, while poverty, estimated at 44%, would increase to 67% in 2006, if Israel's decision to cut $55 million tax-receipts transferts to the Palestinian Authority and the US and the EU's decisions to stop direct transferts to the PA are maintained . On May 6 and 7, 2006, hundreds of Palestinians demonstrated in Gaza and the West Bank demanding payment of their wages. Tension between Hamas and Fatah has been slowly risen with the "economic squeeze" on the PA . While both Israel and the US maintain a "hard line" against Hamas, which since the 2006 legislative elections is in charge of the PA, presided by Fatah leader Mahmoud Abbas, the EU has looked for ways to allow the World Bank to find new ways to fund the PA.

Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined by about one-third between 1992 and 1996 due to the combined effect of falling aggregate incomes and rapid population growth. The downturn in economic activity was largely the result of Israeli closure policies - the imposition of border closures in response to security incidents in Israel - which disrupted labor and commodity market relationships between Israel and the WBGS. The most serious social effect of this downturn was rising unemployment, which in the WBGS during the 1980s was generally under 5%; by 1995 it had risen to over 20%. Israel's use of comprehensive closures during the next three years decreased and, in 1998, Israel implemented new policies to reduce the impact of closures and other security procedures on the movement of Palestinian goods and labor. Recovery was supended in the last quarter of 2000 with the outbreak of violence, which triggered tight Israeli closures of Palestinian self-rule areas and severely disrupted trade and labor movements. In 2001, and even more severely in 2002, Israeli military measures in Palestinian Authority areas resulted in the destruction of much capital plant and administrative structure, widespread business closures, and a sharp drop in GDP. Including Gaza Strip, the UN estimates that more than 100,000 Palestinians out of the 125,000 who used to work in Israel, in Israeli settlements, or in joint industrial zones have lost their jobs. In addition, about 80,000 Palestinian workers inside the Territories are losing their jobs. International aid of $2 billion in 2001-02 to the West Bank and Gaza Strip prevented the complete collapse of the economy .

Figure 1: Real Annual GDP Growth, West Bank. Source: CIA World Factbook

In 2005, the PNA Ministry of Finance cited "the construction of the separation wall", started in the second half of 2002, as one reason for the depressed Palestinian economic activity.[1]. Real GDP growth in the West Bank declined substantially in 2000, 2001, and 2002, and increased modestly in 2003 and 2004 (see Figure 1); about a third of the barrier had been completed by late 2005 [2]. The World Bank attributes 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 predicts a real growth rate of -0.2% in 2006 and -0.6% in 2007. (The World Bank Group West Bank and Gaza Update, November 2005, p. 9)

Economy of the West Bank

Main article: Economy of the West Bank

History of the Palestinian economy

Subsequent to the Israeli retreat from the entire Gaza Strip unilaterally enacted in August 2005 by prime minister Ariel Sharon, hundreds of Palestinian workers who had been employed in the Israeli settlements were laid off, or rehired for sustantially lower wages .

January 2006 legislative elections aftermaths

See main article Palestinian legislative election, 2006#Aftermaths

Following the January 2006 legislative elections, won by Hamas, the Quartet (apart of Russia) cut all funds to the Palestinian Authority led by prime minister Ismail Haniyah (Hamas). "The Palestinian Authority has a monthly cash deficit of some $60 million to $70 million after it receives between $50 million and $55 million a month from Israel in taxes and customs duties collected by Israeli officials at the borders but owed to the Palestinians." Beginning March 2006, "the Palestinian Authority will face a cash deficit of at least $110 million a month, or more than $1 billion a year, which it needs to pay full salaries to its 140,000 employees, who are the breadwinners for at least one-third of the Palestinian population. The employment figure includes some 58,000 members of the security forces, most of which are affiliated with the defeated Fatah movement." Since the January 25 elections, "the Palestinian stock market has already fallen about 20 percent", while the "Authority has exhausted its borrowing capacity with local banks." Israel has ceased transferring the $55 million tax-receipts to the PA — since the PA has no access point (ports, airports, etc.) to perceive taxes, it is Israel that is charged with this duty &mdash. These funds accounted for a third of the PA's budget, two thirds of its proper budget, and insure the wages of 160 000 Palestinian civil servants (among them 60 000 security and police officers), on which a third of the Palestinian population is dependent. Israel has also decided to increase controls on check-point, which has been since the beginning of the Second Intifada a main cause of the 2001-2002 economic recession, which the World Bank has compared to the 1929 economic crisis. Furthermore, the US and the EU have stopped 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 to the PA . On May 6 and 7, 2006, hundreds of Palestinians demonstrated in Gaza and the West Bank demanding payment of their wages. Tension between Hamas and Fatah has been slowly risen with the "economic squeeze" on the PA . The World Bank had already compared the 2001 and 2002 economic recession, due to the Second Intifada and Israel's refusal to transfer tax receipts, to the 1929 economic crisis. The UN institution underlines that unemployment, which was estimated to 23% in 2005, would increase to 39% in 2006, while poverty, estimated at 44%, would increase to 67% in 2006 .

Statistics (West Bank & Gaza strip)

GDP: purchasing power $2.468 billion (2003 est.)

GDP - real growth rate: -22% in the West Bank, 4.5% in the Gaza Strip (2003 est.)

GDP - per capita: purchasing power parity - $800 in the West Bank (2002 est.) $600 in the Gaza Strip (2003 est.)

GDP - composition by sector: agriculture: 9% industry: 28% services: 63% (2002 est.)

Population below poverty line: 60% (2003 est.)

Inflation rate (consumer prices): 2.2%

Labour Force: NA

Labour force by occupation: agriculture: 13%, industry 21%, services 66% (1996)

Unemployment rate: 60% (2003 est.)

Budget: revenues: $676.6 million expenditures: $1.155 billion, including capital expenditures of NA (2003 est.)

Agricultural products: olives, citrus, vegetables; beef, dairy products

Industries: generally small family businesses that produce cement, textiles, soap, olive-wood carvings, and mother-of-pearl souvenirs; the Israelis have established some small-scale, modern industries in the settlements and industrial centers

Industrial production growth rate: NA

Electricity Production: NA kWh - note: electricity supplied by Israel

Electricity consumption: NA kWh

Electricity imports: NA kWh - note: electricity supplied by Israel (2001)

Exports: $603 million f.o.b.

Export commodities: citrus, flowers

Export partners: Israel, Egypt

Imports: $1.9 billion c.i.f.

Import partners: Israel, Egypt

Debt - external: $108 million (1997)

Economic aid - receipient: $2.8 billion (2001 est.)

Currency: new Israeli shekel (ILS - West Bank & Gaza Strip); Jordanian dinar (JOD - West Bank)

Currency code: ILS; JOD

Exchange rates: new Israeli shekels per US dollar - 4.5541 (2003), 4.7378 (2002), 4.2057 (2001), 4.0773 (2000), 4.1397 (1999); Jordanian dinars per US dollar - fixed rate of 0.7090 (from 1996)

Fiscal year: calendar year (since 1 January 1992)

See also

• Demographics of Palestine
• Palestine
• Palestinian National Authority
• Israeli-Palestinian conflict