The International Monetary Fund has warned that amid tax cuts by the Israeli government, the outlook for the Palestinian economy remains gloomy and unsustainable.
“The outlook for the Palestinian economy remains dire, with risks tilted to the downside,” said the IMF in a new report. “Amid a deteriorating security, political and social situation, the recovery is losing momentum and per capita income is projected to decline over the medium term,” the report warned.
“The fiscal crisis remains unresolved, amid limited prospects for much-needed deep expenditure reforms and resolution of the outstanding fiscal files with Israel,” the report added.
The report said growth had rebounded in 2021 after the pandemic but had then halved to 3.9% in 2022 and was expected to decline further to 3% in 2023.
It said that key factors contributing to the difficulties in the West Bank and the Gaza Strip were Israel’s withholding of tax revenues “as well as the persistently lackluster support from the international community.”
“Achieving higher economic growth requires coordinated efforts from the PA, Israel, and the international community. Boosting economic growth and improving Palestinian employment and real incomes hinges critically on the easing of Israeli-imposed restrictions on movement, access, and investment—including in Area C—and opening up of Gaza,” the report said.
The report said that one bright spot was that the Palestinian banking sector has largely escaped the economic crisis. “The banking sector remains generally stable amid early signs of asset quality deterioration.”