Economy of the Palestinian territories
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The Palestinian economy refers to the economy of the Palestinian territories, including the West Bank, East Jerusalem and the Gaza strip. Recent geopolitical events have severely damaged the economy of the territories. In September 2000, the Second Intifada began. The increased Palestinian violence and checkpoint closures associated with the conflict caused a recession in 2001-02. The World Bank compared this recession to the Great Depression of 1929 [1]. In 2006, Hamas won legislative control of the Palestinian Authority (PA), triggering a halt in international aid from countries labelling it a terrorist organization, including the United States, members of the European Union, and Israel.[citation needed]
As of December 2006, unemployment has risen from 23% in 2005[1] to over 50%. Two-thirds of Palestinians are living below the poverty line. In the last four months, approximately 10,000 have emigrated from the territories, and approximately 50,000 have applied to do so. For the past nine months, the 160,000 civil service workers, who are the primary breadwinners for a third of households, have not received their full salaries due to the cuts in foreign aid.[2] As a result of the Israeli blockade on the territory, 85 percent of factories are shut or operating at less than 20 percent capacity. Israel estimates that its own businesses are losing $2 million a day from the closing, but Gaza is losing $1 million a day, an amount it is less able to afford.[3]
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[edit] Economy of the West Bank
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Economic conditions in the West Bank - where economic activity is governed by the Paris Economic Protocol of April 1994 between Israel and the Palestinian Authority - have deteriorated since the early 1990s. Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined 36.1% between 1992 and 1996 owing to the combined effect of falling aggregate incomes and robust population growth. The downturn in economic activity was due to extensive corruption in the newly governing Palestinian Authority, and to Israeli closure policies - the imposition of generalized border closures in response to security incidents in Israel - which disrupted previously established labor and commodity market relationships between Israel and the WBGS. The most serious negative social effect of this downturn has been the emergence of chronic unemployment; average unemployment rates in the WBGS during the 1980s were generally under 5%; by the mid-1990s this level had risen to over 20%. Since 1997 Israel's use of comprehensive closures has decreased and, in 1998, Israel implemented new policies to reduce the impact of closures and other security procedures on the movement of Palestinian goods and labor. In October 1999, Israel permitted the opening of a safe passage between the West Bank and the Gaza Strip in accordance with the 1995 Interim Agreement. These changes in the conduct of economic activity have fueled a moderate economic recovery in 1998-99.
GDP: purchasing power parity - $3.3 billion (1999 est.)
GDP - real growth rate: 4.6% (1999 est.)
GDP - per capita: purchasing power parity - $2,050 (1999 est.)
GDP - composition by sector:
agriculture: 33%
industry: 25%
services: 42% (includes Gaza Strip) (1995 est.)
Inflation rate (consumer prices): 5% (includes Gaza Strip) (1999 est.)
Labor force - by occupation: agriculture 13%, industry 13%, commerce, restaurants, and hotels 12%, construction 8%, other services 54% (1996)
Unemployment rate: 14.5% (includes Gaza Strip) (1998 est.)
Budget:
revenues: $1.6 billion
expenditures: $1.73 billion, including capital expenditures of $NA (includes Gaza Strip) (1999 est.)
Industries: generally small family businesses that produce cement, textiles, soap, olive-wood carvings, and mother-of-pearl souvenirs; the Israelis have established some small-scale, modern industries in the settlements and industrial centers
Industrial production growth rate: NA%
Electricity - production: NA kWh; note - most electricity imported from Israel; East Jerusalem Electric Company buys and distributes electricity to Palestinians in East Jerusalem and its concession in the West Bank; the Israel Electric Company directly supplies electricity to most Jewish residents and military facilities; at the same time, some Palestinian municipalities, such as Nabulus and Janin, generate their own electricity from small power plants
Agriculture - products: olives, citrus, vegetables; beef, dairy products
Exports: $682 million (includes Gaza Strip) (f.o.b., 1998 est.)
Exports - commodities: olives, fruit, vegetables, limestone
Exports - partners: Israel, Jordan, Gaza Strip
Imports: $2.5 billion (includes Gaza Strip) (c.i.f., 1998 est.)
Imports - commodities: food, consumer goods, construction materials
Imports - partners: Israel, Jordan, Gaza Strip
Debt - external: $108 million (includes Gaza Strip) (1997 est.)
Economic aid - recipient: $800 million pledged (includes Gaza Strip) (1999)
Currency: 1 new Israeli shekel (NIS) = 100 new agorot; 1 Jordanian dinar (JD) = 1,000 fils
Exchange rates: new Israeli shekels (NIS) per US$1 - 4.2260 (November 1999), 3.8001 (1998), 3.4494 (1997), 3.1917 (1996), 3.0113 (1995); Jordanian dinars (JD) per US$1 - fixed rate of 0.7090 (from 1996), 0.7005 (1995)
Fiscal year: calendar year (since 1 January 1992)
[edit] History of the Palestinian economy
For nearly 30 years, Israel permitted thousands of Palestinians to enter the country each day to work in construction, agriculture and other blue-collar jobs. The Israelis got cheap labor, and the Palestinians earned significantly more than they would at home. Until the mid-1990s, up to 150,000 people -- about a fifth of the Palestinian labor force -- entered Israel each day. After Palestinians unleashed a wave of suicide bombings, the idea of separation from the Palestinians became popular in Israel. Israel found itself starved for labor, and gradually replaced most of the Palestinians with migrants from Thailand, Romania and elsewhere.[2][3]
In 2005, the PNA Ministry of Finance cited "the construction of the separation wall", started in the second half of 2002, as one reason for the depressed Palestinian economic activity.[4] Real GDP growth in the West Bank declined substantially in 2000, 2001, and 2002, and increased modestly in 2003 and 2004 (see Figure 1); about a third of the barrier had been completed by late 2005 [5]. The World Bank attributes the modest economic growth since 2003 to "diminished levels of violence, fewer curfews, and more predictable (albeit still intense) closures, as well as adaptation by Palestinian business to the contours of a constrained West Bank economy". Under a "disengagement scenario" the Bank predicts a real growth rate of -0.2% in 2006 and -0.6% in 2007. (The World Bank Group West Bank and Gaza Update, November 2005, p. 9)
Post-disengagement Gaza has been beset by bread shortages and severe shortages of basic humanitarian supplies caused by ongoing closures of the al Mentar/Qarni (Arabic/Hebrew) border-crossing into Israel, though Israel's offer to open other crossings in its place has been refused by the Hamas-run Palestinian authority.[4]
[edit] January 2006 legislative elections aftermath
See main article Palestinian legislative election, 2006#Aftermaths
Following the January 2006 legislative elections, won by Hamas, the Quartet (apart from Russia) cut all funds to the Palestinian Authority led by prime minister Ismail Haniyah (Hamas). "The Palestinian Authority has a monthly cash deficit of some $60 million to $70 million after it receives between $50 million and $55 million a month from Israel in taxes and customs duties collected by Israeli officials at the borders but owed to the Palestinians." Beginning March 2006, "the Palestinian Authority will face a cash deficit of at least $110 million a month, or more than $1 billion a year, which it needs to pay full salaries to its 140,000 employees, who are the breadwinners for at least one-third of the Palestinian population. The employment figure includes some 58,000 members of the security forces, most of which are affiliated with the defeated Fatah movement." Since the January 25 elections, "the Palestinian stock market has already fallen about 20 percent", while the "Authority has exhausted its borrowing capacity with local banks."[5] Israel has ceased transferring the $55 million tax-receipts to the PA — since the PA has no access point (ports, airports, etc.) to perceive taxes, it is Israel that is charged with this duty. These funds accounted for a third of the PA's budget, two thirds of its proper budget, and insure the wages of 160 000 Palestinian civil servants (among them 60 000 security and police officers), on which a third of the Palestinian population is dependent. Israel has also decided to increase controls on check-point, which has been since the beginning of the Second Intifada a main cause of the 2001-2002 economic recession, which the World Bank has compared to the 1929 economic crisis. Furthermore, the US and the EU have stopped direct aid to the PA, while the US imposed a financial blockade on PA's banks, impeding some of the Arab League's funds (e.g. Saudi Arabia and Qatar) from being transferred to the PA.[6] On May 6 and 7, 2006, hundreds of Palestinians demonstrated in Gaza and the West Bank demanding payment of their wages. Tension between Hamas and Fatah has been slowly risen with the "economic squeeze" on the PA.[7] The World Bank had already compared the 2001 and 2002 economic recession, due to the Second Intifada and Israel's refusal to transfer tax receipts, to the 1929 economic crisis. The UN institution underlines that unemployment, which was estimated to 23% in 2005, would increase to 39% in 2006, while poverty, estimated at 44%, would increase to 67% in 2006.[6]
[edit] Statistics (West Bank & Gaza strip)
| GDP | purchasing power $2.468 billion (2003 est.) |
| GDP - real growth rate | 22% in the West Bank, 4.5% in the Gaza Strip (2003 est.) |
| GDP - per capita | purchasing power parity - $800 in the West Bank (2002 est.) $600 in the Gaza Strip (2003 est.) |
| GDP - composition by sector | agriculture: 9% industry: 28% services: 63% (2002 est.) |
| Population below poverty line | 60% (2003 est.) |
| Inflation rate (consumer prices) | 2.2% |
| Labour force by occupation | agriculture: 13% industry: 21% services: 66% (1996 est.) |
| Unemployment rate | 60% (2003 est.) |
| Budget | revenues: $676.6 million expenditures: $1.155 billion, including capital expenditures of NA (2003 est.) |
| Agricultural products | olives, citrus, vegetables; beef, dairy products |
| Industries | generally small family businesses that produce cement, textiles, soap, olive-wood carvings, and mother-of-pearl souvenirs; the Israelis have established some small-scale, modern industries in the settlements and industrial centers |
| Electricity | supplied by Israel (2001 est.) |
| Exports: | $603 million f.o.b. |
| Export commodities | citrus, flowers |
| Export partners | Israel, Egypt |
| Imports | $1.9 billion c.i.f. |
| Import partners | Israel, Egypt |
| Debt - external | $108 million (1997 est.) |
| Economic aid - recipient | $2.8 billion (2001 est.) |
| Currency | new Israeli shekel (ILS - West Bank & Gaza Strip); Jordanian dinar (JOD - West Bank) |
| Currency code | ILS; JOD |
| Exchange rates | new Israeli shekels per US dollar - 4.5541 (2003), 4.7378 (2002), 4.2057 (2001), 4.0773 (2000), 4.1397 (1999); Jordanian dinars per US dollar - fixed rate of 0.7090 (from 1996) |
| Fiscal year | calendar year (since 1 January 1992) |
[edit] References
- ^ (French) "Le Quartet cherche une solution à la banqueroute palestinienne", Le Monde, May 9, 2006. Retrieved on 2006-05-09.
- ^ NPR: Palestinians Increasingly Leaving the West Bank
- ^ Isolation of Gaza Chokes Off Trade, The New York Times, September 19, 2007
- ^ "Palestinian goods begin steady flow into Israel", The Boston Globe, 2006-06-05.
- ^ "U.S. and Israelis Are Said to Talk of Hamas Ouster", The New York Times, February 14, 2006.
- ^ a b (French) "Le Quartet cherche une solution à la banqueroute palestinienne", Le Monde, May 9, 2006. Retrieved on 2006-05-09.
- ^ "Three die in Fatah-Hamas clashes", BBC News, May 8, 2006. Retrieved on 2006-05-09.
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