Given the extraordinary circumstances in the West Bank and Gaza, the Palestinian economy has proved to be surprisingly resilient, said the International Monetary Fund (IMF) in a recent report on the region’s performance. By early 2003, there were already signs that the downward trend had been stopped and that the economy was beginning to stabilize.
The study covers the impact of the Second Intifada on the Palestinian economy and banking sector from September 200 to present. It explains how the regime of closures, checkpoints and curfews has made it extremely difficult to conduct normal business activity, and has curtailed the ability of Palestinians to work in Israel or even to get to their places of work in the West Bank.
Since the beginning of the uprising in September 2000, economic activity has fallen dramatically but, contrary to initial impressions, the economy did not collapse, stated the report. The IMF estimates that real gross domestic product growth (GDP) fell by 15 percent in 2001 and by 14.5 percent in 2002. Unemployment was at 25.5 percent in 2001 and 31.3 percent in 2002.
Palestinian exports declined steeply by 38 percent in 2001, the IMF estimates. In 2002, exports declined further by 23 percent, proxied by imports of goods and services by Israel from the Palestinian Authority.
By the second quarter of 2002, during the conflict’s most intense period, the number of Palestinians working in Israel had fallen to only 33,000. But by the end of 2002, with some modest easing of restrictions, this number had recovered slightly to around 56,000.
Despite all the pressures and difficulties, more than two thirds of the Palestinian labor force remain employed, the banking system is still operating, and the Palestinian Authority has continued to provide essential services in education and health and pay the wages of its civil servants. And even while the restrictions remain in place, there are signs that the economy has stabilized.
The IMF attributes the stability to the involvement of the international community and to the substantial external assistance provided to the West Bank and Gaza. Donor aid is estimated to have doubled since the beginning of the Intifada, with much of that increase inform of direct budgetary assistance to the Palestinian Authority. This allowed the PA to continue its operations, pay wages, and limit the accumulation of arrears to the private sector.
Equally important, however, has been private external assistance, mostly in form of remittances from family members abroad, but also through Non-governmental Organizations (NGO) and charities. These private flows have helped offset some of the loss of income from workers in Israel, while at the same time stabilizing the level of deposits in the banking system. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
