RAMALLAH, September 7, 2016 (WAFA) – A predicted 3.3 percent growth rate in GDP in the West Bank and Gaza in 2016 is insufficient to reduce unemployment and boost per capita incomes, the International Monetary Fund (IMF) said in a report released Wednesday in Ramallah and New York.
In its report to the Ad Hoc Liaison Committee (AHLC), the IMF said that “political and security uncertainties weigh heavily on the prospects for growth.”
It said: “Under these conditions and with sustained moderate policy reforms by the Palestinian Authority, real GDP growth in the West Bank and Gaza will likely reach 3.3 percent in 2016 (2.7 percent in the West Bank, and 5.5 percent in Gaza) and around 3.5 percent in the medium term—insufficient to reduce unemployment and boost per capita incomes.”
Unemployment reached almost 27 percent in June in the Palestinian areas, up by 2 percent from the same month last year, with Gaza reporting more than 40 percent unemployment rate.
The report, which reviews recent developments in the Palestinian economy, warned however that escalating violence, further declines in donor support, the inability to effectively contain spending and threats to correspondent bank relations could impede predicted growth.
“While assertive policy actions are needed to mitigate risks, a more fundamental improvement in the outlook requires a political breakthrough,” said the IMF.
It said that a priority in 2016 is to alleviate pressures associated with the nearly $500 million projected financing gap, and mitigate the risk of an even larger gap.
“The Palestinian Authority should focus on resisting pressures on the wage bill, intensifying revenue enforcement efforts, and considering possible contingency plans,” said the report.
“To ensure fiscal and economic sustainability in the medium term, the authorities need to maintain a gradual and balanced approach to fiscal consolidation, underpinned with fiscal structural reforms.”
The IMF said improving economic cooperation with Israel remains important.
It also said that reversing the decline in donor aid will be crucial to avoid too rapid budget compression and create space for growth-friendly investment, and efforts to maintain financial stability and develop a longer-term policy vision can help create conditions for private sector-led growth.
Prime Minister Rami Hamdallah had said that donor aid had declined by more than 70 percent in 2016, which will leave a negative impact on economic growth in the West Bank and Gaza.
He had urged the donors in recent meetings to resume financial support for the Palestinian people living under Israeli occupation.
M.A.
