World Bank pessimistic about Palestinian economy

Lior Greenbaum 20 Nov 05 15:23

The World Bank has provided a pessimistic macroeconomic forecast for the Palestinian Authority (PA). The World Bank predicts that economic performance in the West Bank and Gaza Strip will continue to be both less than previously and below their potential.

The World Bank predicts that the PA's GDP will be $3.93 billion in 2005 (5.7% higher than in 2004), and GDP per capita will be $1,119. Gross disposable income per capita, including humanitarian aid and transfers from abroad, is $1,654. The unemployment rate is expected to reach 25%, and the poverty rate 45%.

Unless the economic and security circumstances change, the World Bank predicts that the PA's GDP per capita will fall to $1,063 in 2007, the unemployment rate will rise to 31%, and the poverty rate to 50%.

In its updated forecast for the PA's economy, the World Bank says that the PA's financial situation continues to be a problem. The PA's revenues were $99 million a month in January-August 2005, including an average of $32.8 million from domestic revenues (including tax collection), and $61 million a month in transfers from Israel.

In practice, the PA's available monthly revenues, after deducting debts by Palestinian municipalities to Israeli companies, is $70.2 million. However, the PA's monthly expenditure is $122.85 million, including $80.1 million in salaries alone. The PA's monthly deficit is therefore $52.63 million.

In order to cover this deficit, the PA relies on donors, but international support for the PA was less than projected in January-August. The Palestinians had hoped to receive $654 million, plus $240 million for establishing a social welfare net. In practice, the PA obtained $248.5 million in January-August - an average of $31 million a month. This total figure includes $148 million from Arab countries, and $80 million from a World Bank fund.

Published by Globes [online], Israel business news - www.globes.co.il - on November 20, 2005

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