"The economy of the occupied Palestinian territory grew by 9.3% in 2010, with growth in Gaza at 15% and in the West Bank at 7.6%," states UNCTAD in its annual report on assistance to the Palestinian people. However, Palestinian GDP per capita is still 7% below its level in 1999.
For the sake of comparison, Israel's GDP grew by 4.5% in 2010, and subsequently slowed to 3.3% in the second quarter of 2011.
Despite the economic growth, the Palestinian unemployment rate was 30% in 2010, unchanged from the year before, and 26% of the population live in poverty. The poverty rate in the Gaza Strip reached 38% in 2010, and the poverty rate in the West Bank was 18%. Half of households lack food security, which pose a serious threat to the Palestinian human capital.
UNCTAD says, "There is considerable fiscal 'leakage' as a result of substantial levels of 'indirect imports'. As stipulated by the Paris Protocol, Palestinian imports from Israel are not taxed. However, a significant portion of such imports is made up of goods produced in the rest of the world and re-exported to the occupied Palestinian territories, with import revenues accruing to the Israeli Treasury. A recent study by the Bank of Israel indicates that about 58% of what is officially reported as Israeli exports to the occupied Palestinian territories actually comes from abroad through Israel's trade sector. Customs revenue from these imports is captured by the Israeli authorities and not transferred to the Palestinian Authority. The loss to the Palestinian treasury is estimated to be in the range of $480 million per year, or 25% of Palestinian public revenue."
UNCTAD estimates that if were these funds available as fiscal stimulant, the Palestinian GDP could expand by an additional 10% ($500 million per year) and employment could increase by 4% (30,000-40,000 jobs per year). This loss highlights the urgency of reconsidering the revenue clearance arrangement between the Palestinian Authority and Israel, and the need for measures to remedy the negative impacts of information "asymmetry" between the two sides. This new evidence on Palestinian imports confirms that much of Palestinian trade is actually with the rest of the world rather than with Israel.
UNCTAD says that the Palestinian GDP growth in 2010 "is not a sign of sustainable recovery but rather reflects an economy rebounding from a low base. It says the growth has come after a decade-long economic regression and continuing de-industrialization." UNCTAD worries about the sustainability of growth due to observed technological regression and the fact that the 2010 growth relied on substantial donor aid and public expenditure. It says that private-sector revival is still constrained by the construction of the "separation barrier", movement and access restrictions, limited access to external markets for the export of goods or the import of production inputs, and a much-reduced productive and natural-resource base.
"The separation barrier deepens isolation from global markets: The movement of Palestinian people and goods in the West Bank in 2010 was obstructed by the presence of over 500 obstacles and checkpoints. Palestinian exports to Israel, which account for about 90% of total occupied Palestinian territory exports, fell by an alarming 30% during 2008-2009 and have yet to recover."
UNCTAD says that the Palestinian trade deficit with Israel accounted for more than 70% of the occupied Palestinian territory's total $4 billion trade deficit in 2010 - greater than the $2.7 billion of net current transfers, which include total donor support to the Palestinian Authority.
UNCTAD says, "A significant constraint on the development of the Palestinian national economy is the growing physical and demographic separation of East Jerusalem from the rest of the occupied Palestinian territory. The viability of a future independent Palestinian State depends, among other things, on re-integrating the economy of East Jerusalem within the broader national economy and allowing it to reassume its historic pivotal economic role."
Published by Globes [online], Israel business news - www.globes-online.com - on August 25, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011