JERUSALEM, 15 September 2006 — The World Bank said yesterday a Western aid embargo and Israeli restrictions could make 2006 the worst year in the Palestinian Authority’s economic history. The international lending agency said the average Palestinian’s personal income would fall by 40 percent, while the rate of poverty would rise to 67 percent of the population.
“We are now facing a severe economic crisis in Gaza and the West Bank — one that risks reversing the combined efforts of the past 13 years toward a sustainable economy,” A. David Craig, the World Bank’s director for the West Bank and Gaza Strip, wrote in the report. “If the current situation continues throughout 2006, this may be the worst year in the Palestinian economic history,” he added.
The Palestinian Authority was formed in the occupied West Bank and Gaza Strip under 1993 interim peace talks with Israel. Hopes for full independence were dashed when negotiations stalled in 2000 and an armed Palestinian uprising erupted.
The World Bank estimated that growth per capita in the Palestinian territories would fall by 27 percent in 2006, while personal income would decline by 30 percent — a one-year contraction of economic activity equivalent to a deep depression. The bank said the unemployment rate would nearly double, from 23 percent in 2005 to 40 percent in 2006.
Barring a change in international aid policy, the World Bank said unemployment would rise to 47 percent and poverty to 74 percent by 2008. The poverty rate was 44 percent in 2005. By 2008, the World Bank said, the cumulative decline in real growth since 1999 would reach 55 percent.
Meanwhile, two Palestinian firms began handing out food coupons to tens of thousands of unpaid government workers on Wednesday, underscoring the dire economic situation facing the Hamas-led administration. The government has been unable to pay full wages to 165,000 employees since March after the West imposed an aid embargo over Hamas’ refusal to recognize Israel.