Israel Fears Economic Crisis, Annexation Could Cause Palestinian Street to Explode

An outbreak of protests targeting Israeli forces and undermining the Palestinian Authority could soon take hold, as all sectors of the West Bank economy suffer significant losses

Yaniv Kubovich
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A demonstration in Nablus where an image of U.S. Secretary of State Mike Pompeo was burned, in the West Bank, on May 13, 2020.
A demonstration in Nablus where an image of U.S. Secretary of State Mike Pompeo was burned, in the West Bank, on May 13, 2020.Credit: AFP
Yaniv Kubovich

The combination of Israel’s annexation plans and the economic difficulties the Palestinian territories are experiencing due to the coronavirus pandemic could prove to be an explosive mix in the West Bank, Israeli officials fear.

An outbreak of protests could soon enough sweep through the region, targeting Israeli forces and undermining the stability of the rule of Palestinian President Mahmoud Abbas, Israeli defense officials said in closed meetings with politicians.

When asked to evaluate the implications of annexing settlements, intelligence officials said that over the past two years, West Bank residents have mainly come out to protest economic issues.

The officials noted that, for the most part, they avoided a violent escalation even when the United States moved its embassy from Tel Aviv to Jerusalem, as well as during the strikes of Palestinian prisoners in Israeli jails and even when Gazans were getting shot during marches on the border fence.

The defense officials presented data from the Palestinian Central Bureau of Statistics, as well as intelligence information.

As of now, 375 COVID-19 cases have been reported in the West Bank and Gaza Strip, along with two deaths from the disease. But the economic damage from the outbreak in the Palestinian Authority is much greater and worrying to senior Israeli defense officials – who in recent years have attributed the relative calm in the West Bank to the improved economic situation of the Palestinians.

Add to all this the freeze on transferring taxes collected by Israel on behalf of the PA – with the goal of putting pressure on the Palestinians to stop paying money to the families of terrorists. It is estimated that Israel is holding today about 720 million shekels ($203 million) in taxes from the PA.

The economic forecasts for 2020 from before the coronavirus outbreak expected that gross domestic product in the Palestinian Authority would be $16.1 billion. But given the present figures, which take into account the economic crisis caused by the pandemic, the forecast for GDP in the PA has dropped to just $13.6 billion – 13.5 per cent less than in 2019.

A check-point for entrance into Israel in the Hebron area, in early May, 2020.
A check-point for entrance into Israel in the Hebron area, in early May, 2020.Credit: MUSSA ISSA QAWASMA/Reuters

The assessments of senior officials in the PA – which the Israeli defense establishment consider plausible – are that all sectors of the PA’s economy will suffer significant damage. The sectorial estimates forecast a drop of 14.7 per cent in revenues from agriculture, compared to 2019, and a drop of 18.5 per cent from industry. The construction sector is forecast to shrink by about 25 per cent and the services sector, which includes education and health, is expected to shrink by 11.5 per cent.

Moreover, it should not be forgotten than one of the major levers of economic growth for the Palestinian economy is the Palestinians who work in Israel. Before the virus outbreak, about 120,000 Palestinians went to work every day in Israel and the settlements, and an estimated tens of thousands more West Bank residents crossed the Green Line into Israel without an entry permit to work.

The Palestinian workers employed in Israel and the settlements received higher wages than what is common in the PA, which gave a major contribution to the purchasing power of the Palestinian economy. Since the coronavirus outbreak began, only about 30,000 Palestinians are still working in Israel and the settlements. This has caused significant damage to what until recently was a stable economic class, compared to others in the West Bank.

Add to all this the ban on Israelis entering the PA during the coronavirus outbreak, which is still in force. This mostly affects Arab citizens of Israel, who regularly bought goods in the PA. The area's tourism industry has collapsed as well. Hotels in Ramallah, Jenin and Bethlehem are still closed to the public, and the tourists are unable to return. The restaurant industry has not returned to regular operation either.

The Palestinian Authority is receiving aid from Arab and European countries, but it is expecting a drop in the financial support it gets due to the global economic crisis. The steep drop in the price of oil has also made it difficult for the Gulf states to continue to support the PA, as they have done in recent years.

The Palestinian social development ministry forecasts that about another 100,000 families will fall into poverty by the end of May. The economic situation and the fear of many in the West Bank about their financial future has led to a major increase in violence at home and in the streets. About 1.4 million children in the West Bank and the Gaza Strip have not yet gone back to school, and some have gone to work to help support their families.

Israeli defense officials are worried that hundreds of thousands of young people who are not studying or employed at the moment will come out and take action against the IDF and Israeli targets in the West Bank, all the more so if Israel continues with its plans for annexation.

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