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Financial News: World Bank Warns Gaza Economy 'In Free Fall'

World Bank Warns Gaza Economy 'In Free Fall'

09/25/2018 - 09:53:00 (RTTNews)

(RTTNews) - The economy in the Gaza Strip is collapsing, thanks to a decade-long blockade and other political decisions, and can no longer be supported by aid flows, the World Bank warned Tuesday.

"Gaza's economy is in free fall, marking minus 6 percent growth in the first quarter of 2018 with indications of further deterioration since then," the global lender said in a report. The self-governing Palestinian territory's economic situation is "alarming" with every second person living in poverty and the unemployment rate for its overwhelmingly young population at over 70 percent, the World Bank report said.

The report will be presented at the bi-annual meeting of the Ad Hoc Liaison committee on September 27 in New York.

Marina Wes, World Bank Country Director for West Bank and Gaza, said, "A combination of war, isolation, and internal division has left Gaza in a crippling economic state and exacerbated the human distress."

"A situation where people struggle to make ends meet, suffer from worsening poverty, rising unemployment and deteriorating public services such as health care, water and sanitation, calls for urgent, real and sustainable solutions," she added. In addition to the decade-long blockade, a combination of factors such as the decision of the Palestinian Authority to reduce the monthly payments to the area, and the cuts to the international aid to the region, mainly from the United States, contributed to Gaza's economic collapse.

"The economic and social situation in Gaza has been declining for over a decade but has deteriorated exponentially in recent months and has reached a critical point," Wes said.

"Increased frustration is feeding into the increased tensions which have already started spilling over into unrest and setting back the human development of the region's large youth population."

Meanwhile, the situation in the West Bank is not as dire currently, the report said. However, the past consumption-driven growth is faltering and the economy is expected to slow considerably in the coming period, the World Bank said.

The lender stressed the need for a balanced approach to tackle the dire situation in Gaza, by combining immediate crisis response with steps to create an environment for sustainable development. The report urged the Israel government to create a conducive environment by lifting trade restrictions and allowing the movement of people and goods. Further, the Palestinian Authority should initiate policies and projects needed for sustainable economic development, including support for trade in digital services, the World Bank said.

Legitimate institutions should govern Gaza in a transparent and efficient manner and carry out reforms to create a positive business environment to support a sustained economic recovery, the report added. Citing the young and relatively well-educated Palestinian population, Wes said a renewed emphasis on job creation will pay off hugely in terms of economic development.

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