IMF: Palestinian economy faces increasingly difficult conditions


In its assessment of the economic developments in the West Bank and the Gaza Strip and the financial situation of the Palestinian Authority (PA), the International Monetary Fund (IMF) said on Wednesday that the Palestinian economy is facing increasingly difficult conditions.

A report by the IMF covering the period from 31st January- 9th February 2017 revealed that the Gross Domestic Product (GDP) increased from 3.5% in 2015 to 4% in 2016; however, this increase was not enough to create new jobs. It also noted that the unemployment rate jumped to more than 28% in September 2016.

The report emphasized that consumption is still the main engine of growth “amid an atmosphere of political uncertainty as well as the restrictions imposed on crossings, which constitute an obstacle to private sector investments across the West Bank.”

It pointed to the continuation of donor-funded reconstruction works in the Gaza Strip. However, the humanitarian situation is critical due to the delay in the payments and the deterioration of public services.

According to a report by the PA’s Ministry of Finance in Ramallah, the discussions between the PA and the Israeli government have contributed to the payment of the PA’s earlier financial commitments, and helped increase the tax and non-tax revenues by nearly 2% of the GDP.

Karen Ongley, head of the IMF mission, said that the IMF welcomes the cautious approach of the 2017 budget which assumed a decline in the donor support and no additional one-off transfers from Israel.

Ongley pointed out that despite the efforts exerted to boost the domestic revenues, the assumed decline in clearance revenue and other payments from Israel points to a decrease in the total revenues, while spending pressures will remain unchanged.

She predicted that the deficit in recurrent expenditures will rise by 2% of the GDP, which could cause, with the 15% decline in the donor support, a financing gap of about 6% of the GDP.

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