GAZA CITY: At the beginning of 2020, Palestine's GDP was projected to grow by 2.4 percent, compared with nearly 1 percent in 2019 — the lowest growth since 2014. However, the COVID-19 pandemic, combined with the Palestinian Authority’s decision to refused to accept tax revenues from Israel, meant those expectations were not met.
In March, the Palestinian Authority (PA) in the West Bank, led by President Mahmoud Abbas, declared a state of emergency in an attempt to control the spread of COVID-19. Hamas was much slower to accept the reality of the situation, finally imposing even stricter measures in August following the outbreak of COVID-19 in the Gaza Strip.
Minister of National Economy Khaled Al-Osaily estimated the financial losses at about $3 billion, deepening the PA’s financial woes stemming from a deficit in the public budget estimated at $1.4 billion.
Al-Osaily told Arab News that preventive measures had been necessary for the health of the community, but at the same time constituted a “heavy burden” on the economy.
Al-Osaily expected growth to decline by more than 11 percent, a rate forecast by the World Bank’s Economic Monitoring Report issued in June.
According to the World Bank report, more than 121,000 workers had lost their jobs. Palestinian estimates indicate that 300,000 workers have now lost their jobs, either totally or partially, and that the reality in Gaza is even bleaker. The Businessmen Association in Gaza estimated the economic losses due to the pandemic at more than $1 billion.
The General Federation of Palestinian Trade Unions chairman Sami Al-Amsi told Arab News: “The state of emergency imposed by the pandemic has led to the enrolment of between 100,000 and 160,000 workers in the army of the unemployed.”
According to the Federation’s monitoring, the unemployment rate in 2020 exceeded 80 percent. “Coronavirus has killed workers, and I am not exaggerating if I say that there is no worker left at his job,” said Al-Amsi.
The fact that the pandemic coincided with the tax-revenue crisis, which began with the PA’s decision to sever its relations with Israel in May, exacerbated the situation. The latter crisis ended abruptly when, at the end of November, the PA decided to restore its relationship with Israel and receive the money. The PA requires between $120-150 million monthly for operating expenses.
The taxes Israel collects on goods and commodities imported to the Palestinian territories from abroad constitute about 60 percent of the PA’s general budget, with a monthly value in excess of 700 million shekels. Israel charges 3 percent as a commission for collection, as approved by the Paris Economic Protocol.
Experts say the PA reversed its decision to cut ties with Israel for two reasons: Joe Biden’s victory in the US presidential election, and its inability to fulfill its economic obligations.
Receiving 2.5 billion shekels in taxes from Israel helped to revive the fragile Palestinian economy following an 80 percent decrease in the financial revenues of the PA, according to Nasr Abdel Kareem, professor of economics at Birzeit University.
“Israel has been aware from the beginning of the importance of the economy, so kept its keys in its hands to place political pressure on the Palestinian Authority,” he told Arab News
Economist Osama Nofal said that improvement is unlikely in the foreseeable future.
“The economic reality before the outbreak of the pandemic was deteriorating and almost collapsing, with unprecedented rates of poverty and unemployment, and the pandemic worsened this reality,” Nofal told Arab News.
“It will take at least three years for the economy to recover even to 2019 levels,” Nofal added. “Even if the world overtakes coronavirus at the beginning of the new year, the economic cycle will (still need) time to recover.”