IMF: Conflict, infighting, blockade hurting Palestinian economy

International Monetary Fund says Palestinians’ GDP would be 37-130% higher if not for political issues

By AFP and ToI Staff 7 September 2016, 10:40 pm

Edit

A craftsman works on a wooden piece in a shop just outside the Church of the Nativity in Bethlehem on August 15, 2015. (Photo by Micah Bond/FLASH90) a

The conflict with Israel, the blockade on Gaza and internal political infighting have severely constrained the Palestinian economy, according to an International Monetary Fund report released Wednesday.

Palestinian gross domestic product (GDP) per capita would be between 37% and 130% higher were it not for political issues, the IMF said, using three different economic models to assess the impact.

“Absent the political uncertainty and restrictions of the past 20 years, real GDP per capita would have been significantly higher in the West Bank and Gaza,” the report, dated August 26, said.

It predicted the Palestinian economy would grow by 3.3% in 2016, compared with 3.5% last year.

A Palestinian boy sells fresh mint in downtown Gaza City as shoppers crowd the markets in preparation for the Muslim fasting month of Ramadan on June 17, 2015. (AFP PHOTO/MAHMUD HAMS) — A Palestinian boy sells fresh mint in downtown Gaza City, as shoppers crowd the markets in preparation for the Muslim fasting month of Ramadan on June 17, 2015. (AFP PHOTO/MAHMUD HAMS)

The findings echo a Tuesday report from the United Nations, which found the Palestinian economy could double were it not for Israel’s occupation of the West Bank and blockade on Gaza.

Israel captured the West Bank, Gaza Strip and Golan Heights in the 1967 Six Day War. It pulled out of Gaza in 2005, but since then has fought three wars against Hamas, the terror group which rules the Strip, and maintains a blockade on the enclave to prevent Hamas from importing weaponry.

The IMF report painted a gloomy picture of growth prospects, saying unemployment reached 26.9% across the Palestinian territories by the end of June, up 2 percentage points on the previous year.

In Gaza, the unemployment rate is over 40%, with close to two-thirds of young people without jobs.

“Political and security uncertainties weigh heavily on the prospects for growth,” it said.

“Israeli restrictions and continued [Israeli] settlement expansion impede economic activity and exacerbate social hardships,” it said, adding that Hamas’s control of Gaza and divisions between Palestinian factions were also hindering reconstruction.

Palestinians inspect the rubble of a destroyed shopping center after an Israeli airstrike overnight in the southern Gaza Strip city of Rafah, on August 24, 2014. (Abed Rahim Khatib/Flash90)

The Palestinian economy is heavily dependent on international aid, though funding has been declining and could fall by 25% this year, the report said. Further cuts could lead to a “vicious cycle of political and fiscal risks.”

Only a “political breakthrough” could lead to “fundamental improvement in the outlook,” it added, though it called such an occurrence “unlikely.”

The report said the Palestinian Authority, which runs the West Bank, should focus on developing a longer-term fiscal plan for the economy.