Palestinian crisis will deepen without more aid — World Bank

Ramallah The aid-dependent Palestinian economy faces a deepening crisis unless foreign support grows and Israel eases restrictions on its trade, the World Bank said Thursday.

The Palestinian National Authority (PNA) is relying on foreign aid to cover a 2012 budget deficit projected to reach $1.1 billion (Dh4 billion), but most donor countries have not fulfilled their pledges.

The World Bank said in a report released ahead of a meeting on Palestinian aid in Brussels next week that the PNA has received just over half of the funds it needs.

Mariam Sherman, the World Bank's director for the West Bank and Gaza Strip, called on donor countries to meet their pledges to help stabilise the Palestinian economy in the short term.

The report said a slowdown in growth in the Israeli-occupied West Bank, where the Palestinians have limited self-autonomy, "can be attributed to falling donor support combined with the uncertainty caused by the PNA's fiscal crisis, as well as lack of significant new easing of Israeli restrictions".

To help fill the gap, Prime Minister Salam Fayyad last month approved a hike in income tax rates to increase revenues, but the World Bank said the economy was still likely to worsen in 2012.

Fayyad, appointed by Palestinian President Mahmoud Abbas in 2007, is credited with revitalising the West Bank economy. But the World Bank forecast GDP growth in the territory would drop to five per cent in 2012 from 5.8 per cent last year. Per capita GDP in the Occupied Territories, with a combined population of just over four million, is $1,500 a year.

"There is a lot of energy and resourcefulness in the Palestinian private sector which is the longer-term path out of crisis mode towards sustainable economic growth," Sherman said.

The report pointed to growth potential in private sector areas including construction, agriculture, housing and tourism. Instead, economic expansion in recent years has been driven mainly by donor aid, the report said, "which remains stifled by Israeli restrictions on access to natural resources and markets".