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World Bank report: 'Gaza's economy in free fall'

Sept. 25, 2018 5:04 P.M. (Updated: Sept. 26, 2018 4:22 P.M.)
BETHLEHEM (Ma'an) -- The economy in the besieged Gaza Strip is in "free fall" according to a report released, on Tuesday, by the World Bank, calling for urgent action by Israel and the international community to avoid "immediate collapse."

The report was released ahead of a high level meeting of the World Bank's Ad Hoc Liaison Committee (AHLC), responsible for coordinating development assistance to the Palestinians, on September 27th.

The report showed that the unemployment rate is over 70% among youths in Gaza.

The report also highlights the critical challenges facing the Palestinian economy and identifies the needs going forward.

Marina Wes, World Bank Country Director for West Bank and Gaza, said "A combination of war, isolation, and internal division has left Gaza in a crippling economic state and exacerbated the human distress. A situation where people struggle to make ends meet, suffer from worsening poverty, rising unemployment and deteriorating public services such as health care, water and sanitation, calls for urgent, real and sustainable solutions."

"Gaza's economy is in free fall, marking minus 6% growth in the first quarter of 2018 with indications of further deterioration since then."

While the nearly 12-year blockade is the core issue, a combination of factors has more recently impacted the situation in Gaza, including the decision of the Palestinian Authority (PA) to reduce the monthly payments to Gaza by $30 million, the winding down of the $50-60 million per year of United States' aid program, and the cuts to the United Nations Relief and Works Agency (UNRWA) programs.

The PA itself suffers from a decline in financial donations and has an annual deficit of $1.24 billion.

While the current situation in the West Bank is not as terrible, past consumption driven growth is faltering, and the economy is expected to slow considerably in the coming period.

Wes added that "the economic and social situation in Gaza has been declining for over a decade but has deteriorated exponentially in recent months and has reached a critical point. Increased frustration is feeding into the increased tensions which have already started spilling over into unrest and setting back the human development of the region's large youth population."

The report stressed the need for a balanced approach to the situation in Gaza, which combines an immediate crisis response, with steps to create an environment for sustainable development.

Among the immediate responses is to ensure the continuation of essential services, such as energy, water, education, and health. Essential services such as these are critical for the residents livelihoods and for the economy to function.

Another urgent need is to "increase household purchasing power to enable a return to basic economic activity and to boost traditional livelihoods by extending the fishing zone beyond the highly restrictive three miles towards the 20-mile zone agreed in the 1990s."

The World Bank believes that beyond a crisis response, "Israel could support a conducive environment for economic growth by lifting restrictions on trade and allowing the movement of goods and people, without which the economic situation in Gaza will never improve."

The World Bank report added that the PA should initiate policies and projects needed for sustainable economic development, including support for trade in digital services, which could play a leading role in the meantime.

Wes stressed "Palestinian human capital, with its young and relatively well-educated population, could be a source of immense potential. A renewed emphasis on job creation will pay off hugely in terms of economic development. Now is the time for all parties to come together and create an environment that generates opportunities for these young people."

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