The World Bank report warned that “the decisions of the newly elected Israeli government to double monthly deductions from clearance revenues… may indicate a discouraging trend ahead.”
The World Bank warned on Tuesday that the Palestinian economy is facing a “dark” period, with Israel continuing its blockade of the Gaza Strip and increasing restrictions imposed on the occupied West Bank.
The bank expected a decline in the growth of the Palestinian economy in 2023 due to tensions, despite the recovery of private consumption in 2022 and its recovery from the restrictions imposed during the Corona pandemic.
“(economic) growth remains sensitive to escalating tensions in the Palestinian territories, and continued restrictions on movement, access and trade,” said Stefan Emblad, World Bank Country Director and Resident Representative for the West Bank and Gaza Strip.
The report praised the Palestinian Authority’s attempts to bring about reforms and its efforts to reduce the public sector wage bill, but also warned of the suffering of the West Bank and Gaza Strip economies from Israeli restrictions and dependence on foreign donors.
The World Bank will present its report to the Development Assistance Committee, which will meet in Brussels on Wednesday and Thursday.
Emblad stressed that raising living standards, improving the sustainability of public finances, and reducing unemployment in a meaningful way all need “much higher growth rates.”
He noted, “The Palestinian Authority must continue to advance priority reforms, in order to increase revenues, improve debt management, and enhance public finance sustainability.”
Amblad called on supporters to help the Palestinian Authority, and stressed the need for the Israeli government to cooperate “to control public finances and put the economy on a more solid foundation.”
Under the Oslo Accords signed in 1994, Israel collects taxes on products imported into the Palestinian territories on behalf of the Palestinian Authority before transferring them to it.
Israel has long used tax revenues as a bargaining chip with the Palestinians, as it says the Palestinian Authority pays that money to the families of Palestinian prisoners who carried out attacks against Israel or to the families of “martyrs” who died in the conflict.
According to the report, stability, growth and the development of the private sector in the Palestinian territories face many obstacles.
The report lists the obstacles to the continued “restrictions imposed in the West Bank, and the quasi-siege imposed on the Gaza Strip.”
The World Bank considered that failure to remove or reduce these obstacles means that “the performance of the Palestinian economy will remain far below its potential.”
The World Bank report warned that “the decisions of the newly elected Israeli government to double monthly deductions from clearance revenues… may indicate a discouraging trend ahead.”
Israel’s ultra-Orthodox Finance Minister Bezalel Smotrich said in January that Israel was siphoning off about $40 million in clearance or tax funds.
The report indicated that about 22.5 percent of Palestinians working in the West Bank work in Israel or in Israeli settlements in the West Bank, which the international community considers illegal.
This percentage is about four percent lower than it was in 2021.
Despite this, the World Bank says that the unemployment rate in the Palestinian territories remained high, with 24.4 percent in 2022.
The World Bank report coincided with another report by the United Nations envoy for peace in the Middle East, Tor Wiensland, also on Tuesday, who warned of a “dangerous reversal in the Palestinian state-building project” without an immediate “strategic shift”.
The results published by the Palestinian Monetary Authority on its website, on the business cycle last April, showed a decline in the overall index for Palestine, dropping to 13 points last month, compared to 14.9 points in March, as a result of the decline in the West Bank.
