Palestinian Economy Could Shrink Up to 11% in 2020, World Bank Says

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Palestinians walk past a boutique in the West Bank city of Ramallah, 2015.
Palestinians walk past a boutique in the West Bank city of Ramallah, 2015. Credit: Nasser Nasser,AP

The coronavirus crisis could cause an already constrained Palestinian economy to shrink by as much as 11% in the coming year, the World Bank said on Monday.

In a report, the bank also cautioned that the Palestinian Authority, which exercises limited self-rule in the West Bank, could face a financing gap of more than $1.5 billion in 2020 due to reduced revenues and increased health spending.

Prior to the novel coronavirus outbreak, the bank had predicted 2.5% growth in the Palestinian economy in the coming year.

"We now project a full-year decline of at least 7.6%, based on a gradual return to normality from (coronavirus) containment and up to 11% in the case of a slower recovery or further restrictions due to another outbreak," the report said.

The Palestinian economy, which has long faced Israeli constraints on the movement of people and goods, grew by only 1% in 2019, the World Bank said.

Israel has cited security concerns for such restrictions in territory it captured in the 1967 war.

"The situation is dire and requires the PA to take steps that require cooperation with Israel while the leadership is standing its ground to implement its decision to withdraw from agreements with Israel," a senior PA official told Haaretz.

Palestinian President Mahmoud Abbas announced last month that in light of Israel's intent to annex parts of the West Bank, the PA will end all agreements signed with Israel and the United States. The move is centered around the PA's cooperation with Israel on security matters, but ending these agreements also has many civil complications

The official said that it was understood that the decision to revoke agreements with Israel was temporary, until a solution was found for civil and economic issues. "Israel approaches this from the point of view of security, but for Palestinian civilians this is an economic issue that affects and a question of how to make ends meet," the official explained.

The bank praised "decisive action" by the Palestinian Authority to try to halt the spread of infection, including a state of emergency declared in March - and recently eased - that closed off several major Palestinian cities.

But, the bank said, the COVID-19 outbreak would likely deepen unemployment, especially in the West Bank where a large number of workers had lost their jobs in the tourism industry.

It cited 13.7% unemployment in the West Bank in the fourth quarter of 2019 and a figure of 42.7% in the Hamas Islamist-run Gaza Strip, whose borders are tightly controlled by Israel and Egypt.

West Bank health authorities have reported 388 cases of coronavirus, with two deaths. In Gaza, there have been 61 confirmed cases and 1 death.

The Palestinian Ministry of Health reported on Monday that the number of active coronavirus cases in the West Bank stands at 54, the main areas of infections being East Jerusalem, Qalqilya and Hebron. In Gaza, there are 42 active cases.

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