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03 December 2023

No end in sight for Palestinian economic disaster

By Nadim Kawach




The Palestinians’ long-standing dream of prosperity during peace with Israel has not been fulfilled. On the contrary, their economy has continued to deteriorate, investments have tumbled, unemployment has worsened while poverty has soared since Israelis seized their land nearly 40 years ago.


The situation worsened after Hamas won the election in 2006 and formed government in the occupied West Bank and Gaza Strip, prompting Israel, the United States and many other countries to cut off aid and boycott most Palestinian institutions.


By the end of 2006, economic indicators issued by the Palestinian Authority, the International Monetary Fund (IMF) and the Arab League revealed a stark reality – the Palestinian economy was galloping down into a deep abyss.


While the population continued to grow, there was a negative growth in the gross domestic product, a sharp decline in foreign investment, a drop in public spending and a plunge in external aid.


What aggravated the situation was Israel’s calculated policy of continued siege, mass punishment of the Palestinians, seizure of their tax funds and its non-stop attempts to evict them from their land by destroying their farms.


As a result, unemployment maintained its upward trend, the economy crumbled and the per capita income dipped to its lowest levels. All this led to one result – Palestinians became poorer and their despair deepened. “The Palestinian economy has been dealt a severe blow since Hamas won the elections and formed a new government … its victory prompted many countries and organisations to halt aid for the Palestinians and impose restrictions on any dealings with Palestinian banks and other institutions, leading to a sharp decline in the transfer of funds to the Palestinian coffers. Israel also stopped the transfer of all funds raised from taxes, which it imposed on behalf of the Palestinian Authority that are estimated at $55 million (Dh201m) a month. Such funds alone financed nearly 60 per cent of the Palestinian’s current expenditure, mainly salaries to the civil servants,” the Arab League said in a report issued by the Arab Monetary Fund in Abu Dhabi this week.


“As a result, poverty among the Palestinian people has soared to its highest level since Israel occupied the West Bank and Gaza. It exceeded the poverty rates recorded in 2002, which was considered the worst year for the Palestinian economy, according to the World Bank.


“Palestinians under the poverty line were estimated at 74 per cent in 2006 but other estimates put the number at more than 80 per cent, much worse than the rate recorded in 2002.”


Arab League and IMF figures, citing Palestinian Government estimates, showed the population in the occupied West Bank and Gaza peaked at 3.95 million at the end of 2006 compared with 3.82 million in 2005, a growth of 3.4 per cent. The increase boosted the workforce to 872,000 from 827,000 in the same period.


But the increase was not matched by a positive growth in the economy and this boosted unemployment to one of its highest levels of 23.6 per cent compared with only around 14.1 per cent in 2000 and 11.8 per cent in 1999.


After a sustained growth in previous years, the GDP began a steep decline and plunged to around $4.17 billion in 2006 from $4.47bn in 2005 and $4.51bn in 1999. The per capita income of the GDP dived to one of its lowest levels of around $1,055 in 2006 compared with nearly $1,171 in 2005 and $1,464 in 1999, according to the figures.


The plunge in the economic situation allied with Israel’s policies and mounting tensions hit both public and private investments and this has in turn led to an exacerbation of the economic and fiscal conditions in the occupied areas.


The figures showed public investment tumbling to $149.6m in 2006 from $298.1m in 2005 and as high as $743.3m in 1999. Private investment also dived to around $664.4m from $750.5m and as high as $1.3bn in the same period.


Exports of goods and services also suffered, falling to a 15-year low of $369.8m in 2006, nearly half their 1999 level of $730.4m. In contrast, imports slipped slightly to $3.11bn from $3.12bn, creating a trade deficit of $2.74bn in 2006 compared with $2.58bn in 2005.


Government revenues plunged by more than 50 per cent to $1.07bn in 2006 from $1.55bn in 2005, prompting the government to cut expenditure to around $1.72bn from $1.92bn. Despite the cut, the budget deficit nearly doubled to around $654.8m from $367.6m in the same period.


While there was a plunge in most economic sectors, the farming sector was an exception, although it was the main target of Israel’s anti-Palestinian campaigns. Its contribution to the GDP rose to $334m or eight per cent in 2006 from $313m or seven per cent in 2005 while it accommodated 15.5 per cent of the total workforce in 2006 compared to 14.4 per cent in 2005.


“This increase reflects the Palestinian people’s resolution to stick to their land, which is the crux of the conflict… despite persistent and continued Israeli policies aimed at destroying their land, the farming sector has recorded growth,” the Arab League report said.


“But Israel’s hostile policies and its curbs on Palestinian exports, in addition to the construction of the separation wall and seizure of land have restricted the positive effects of the farming sector,” it said.