The economic depression that hit the Palestinian economy in the fourth quarter of 2000, following the eruption of Intifadat Al-Aksa, has dramatically affected the Palestinian annual economic performance, asserts a recently published report by the United Nations Special Coordinator in the Occupied Territories (UNSCO) office. After three years of economic recovery following the previous crisis in 1996, the international body anticipates that the current shock will take even longer to overcome.
In the spring of 2000, the International Monetary Fund (IMF) and the Palestinian Authority (PA) Ministry of Finance projected that the Palestinian economy would continue to grow as it had since 1997 and that real growth rates for GDP and GNP for the Palestinian territory would reach five and six percent respectively. Instead, there was an overall annual decline of 8.2 percent in GDP, and 7.6 percent in GNP.
UNSCO estimates that during the last quarter of 2000, economic activities in the West Bank and Gaza dropped by 51 percent, corresponding to income losses of $671 million and reducing annual GDP from the projected $5,338 million to $4,677 million.
What UNESCO refers to as the “effective disemployment of Palestinian workers in Israel” caused further wage losses estimated at $182 million, reducing annual GNP from the projected $6.654 billion to $5.801 billion. Declining employment in the fourth quarter combined with high population growth has caused per capita income for 2000 to decline by 4.1 percent.
UNESCO attributes the negative economic developments in the Palestinian territories to a combination of factors, first and foremost of which are movement restrictions and border closures imposed by Israeli authorities in response to crisis and confrontation. Of the fourth quarter’s 92 days, UNESCO counted 72 in which the Palestinian border with Israel was effectively closed. Partial or total internal movement restrictions imposed within the West Bank and Gaza were in effect for 92 days in the West Bank and 85 days in Gaza.
A 22 percent increase in the value of bank deposits was recorded for the year as a whole, as compared to 1999. However, the value of outstanding loans, specifically short-term overdrafts, grew by over 34 percent. Business prospects seem to dim as the growth rate of bank credit to businesses also declined to 22 percent in 2000, compared to over 32 percent in 1999.
With closures preventing workers from reaching their workplace, 182,000 Palestinians, who were formerly among the 661,000-strong employed workforce, joined the ranks of the unemployed in the fourth quarter. Thus, the unemployment record low of 10 percent in September 2000, had soon soared to 28.3 percent of the labor force.
Pervious encouraging trends in fighting poverty rate, which declined from 27 percent in 1996 to 21 percent in September 2000, were soon reversed as well. The number of people living below the poverty line rose sharply to 35 percent by the end of the year.
The UNESCO report suggests that local households partially cope with income loss by reducing consumption and shifting to agricultural work, a traditional labor market “shock absorber”. Over a third of the Palestinian population, more than one million people, received some form of emergency assistance, between October and December.
The fiscal situation for the Palestinian Authority also remains fragile. The drop in domestic tax revenue and the continued withholding of Palestinian tax revenues by Israeli authorities is expected to lead to a $371million budget deficit—22 percent of total public expenditures—for 2001.
The economic crisis that characterized the last three months of 2000 has persisted through the first half of 2001. Early economic figures for 2001 show continuing decline in multiple indicators, giving concern for near and medium-term development, even if a political resolution is reached to end the crisis. — (Mena Report)
© 2001 Mena Report (www.menareport.com)
