Standard of Living in West Bank Dropping for First Time in Years, World Bank Warns

The unemployment rate in adults under 30 in the West Bank stands at 40 percent, report says; Gaza continues to hurtle towards collapse, and aid cuts to UNRWA will only exacerbate the crisis

Palestinian children pass by Israeli troops during clashes near Ramallah in the West Bank.
\ MOHAMAD TOROKMAN/ REUTERS

While Israel and the rest of the world are expressing concern about the economic situation in the Gaza Strip and its ramifications for the humanitarian situation there, it turns out that the West Bank’s economy is also showing signs of a slowdown.

A World Bank report issued Thursday morning warns of a possible total collapse of the Strip’s economy, but also warns that the standard of living on the West Bank is stagnating after a number of years in which it was rising.

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According to the report, the Palestinian Authority in the West Bank has gotten more efficient and its income has risen by 22 percent because it has gotten better at collecting taxes. However, the GDP in the West Bank rose only 2.4 percent in 2017, a statistic that actually points to a drop in per-capita GDP because the population increased more than that.

Moreover, the unemployment rate in the West Bank stands at 18 percent, while among adults under 30 it is at 40 percent.

According to the report, one of the reasons for the stagnating West Bank economy is the more stringent money-laundering regulations in Israel, which has led Israeli banks to stop working with banks in the West Bank, creating a severe credit crunch. West Bank residents are also suffering from an increasing cost of living that is linked to to the fact that prices in Israel are rising, while most Palestinian salaries aren’t going up.

However, the majority of the report, which will be submitted to the conference of donor nations scheduled to convene next week in Brussels, focuses on Gaza. According to the report, the ongoing economic deterioration in the Strip threatens its economy and basic social services. There is a burning need for cash infusions as well as strategic planning and a need to open access to foreign markets to allow for a sustainable recovery, the report said.

It also warns that it needs donations to cope with the humanitarian distress. Basic services like electricity, water, sewerage and residents’ access to them are failing fast and pose health risks that could become a serious threat. Gaza’s economy expanded 0.5 percent in 2017, compared to an eight percent growth in 2016. Unemployment, meanwhile, rose from 41.7 percent in 2016 to 43.6 percent in 2017. The report also cites the fact that the PA, which employs 80,000 Palestinians in Gaza, didn’t pay their salaries for half a year in 2017.

A sick Palestinian girl held by her mother inside the Durra hospital in Gaza City.
\ MOHAMMED SALEM/ REUTERS

The report addresses the expected cuts to the United Nations Relief and Works Agency for Palestine Refugees (UNRWA) budget that will limit the UN refugee agency’s ability to provide services and employment and could lead to the dismissal of some 18,000 staffers, which would increase the distress even further. The report does not mention U.S. President Donald Trump’s decision to cut American aid to UNRWA specifically, although UNRWA itself is very concerned about it. UNRWA aids some 80 percent of Gaza’s residents, with 275 schools and 22 medical clinics. It also distributes food to around a million people in the Strip.

According to Marina Wes, the World Bank’s regional director for the West Bank and Gaza, the Strip needs financial aid to ease the humanitarian situation in the short term, but this won’t solve the poor state of Gaza’s business environment. The situation, she said, requires actions by all the parties to renew growth and create jobs. Without removing the restrictions on trade, the Strip will continue to suffer from stagnation and the population will continue to pay a heavy price, she said.

The report shows that there has been a sharp drop in the donations made to the Gaza Strip, from $400 million in 2016 to only $55 million in 2017, which has served to make the situation worse and has affected the supply of food and medicine to a quarter of a million Gazans. The bank stresses that another cut to UNRWA’s budget will put an additional 750,000 Palestinians in the same situation.