Movement restrictions limiting benefits of aid - World Bank

The World Bank has said that the Palestinian economy will not improve over the next year due to the Israeli restrictions on movement in the West Bank and the blockade on the Gaza Strip, despite efforts by the Palestinian Authority (PA) and international donors to boost the local economy. This predicament will exacerbate the humanitarian situation in the enclave, analysts said.

In a report released on 27 April and set to be delivered on 2 May in London to the Ad-Hoc Liaison Committee, a major donors' group, the Bank predicted 3 percent gross domestic product (GDP) growth for the upcoming year "that, taking into account population growth, leaves per capita income static if not lower than the previous year".

However, in spite of the lack of required parallel action, the Bank called for donors to keep giving aid as it "remains critical to ensure the survival of Palestinian institutions that underpin the peace process".

Unemployment in the occupied Palestinian territory has remained high, also due to Palestinians' inability to work in Israel, which was for many years the main employer for residents of the West Bank and Gaza Strip.

The Palestinian economy began to falter with the outbreak of violence in September 2000, and the situation got worse as the PA was under a boycott for most of 2006 and the first half of 2007 due to Hamas's participation in the government.

Since the Islamist group took over Gaza in June 2007, donations have resumed to the government of Salam Fayyad in Ramallah, but the enclave was placed under the tightest restrictions ever. Its borders with Israel and Egypt remain shut for all but humanitarian aid, basic commercial supplies and the passage of urgent medical patients. All exports are banned.

Industry crippled

The blockade on Gaza, home to 40 percent of the occupied Palestinian territory's population, has crippled industry and business in the enclave and unemployment there is expected to continue to rise. Some 96 percent of industrial operations have stopped.

Meanwhile, the West Bank saw negative growth in the first half and only a slight improvement in the second half of 2007, in no small way due to the Israeli checkpoints and roadblocks spread throughout the territory.

Photo: Shabtai Gold/IRIN

The West Bank saw negative growth in the first half and only a slight improvement in the second half of 2007

The findings, the first to be released since the Paris conference last year, which raised about US$7.7 billion worth of pledges for the PA, match predictions made by the Bank last year, when it said donor aid and Palestinian reforms would not lead to economic growth unless accompanied by Israeli policy changes, in which case growth could reach double digits.

Then as now, the Bank said any money raised in Paris for the Palestinian Reform and Development Plan of the current West Bank-based PA, whose government has taken steps to bring it back to financial sustainability and achieved "important milestones", would produce the best results if accompanied by private sector growth.

However, "private sector activity remains constrained and hampered by movement and access restrictions and reduced consumption due to lower purchasing power," the report said, noting that improvement in the business sector was required for the aid-dependent PA to wean itself off international donations.

Israeli officials have said the West Bank roadblocks provide the Jewish state with security and protect its settlements in the occupied territory, while the blockade on Gaza was a result of Hamas rule over the enclave and the continued rocket fire into southern Israel.

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