While in 2014 there was an expansion of 4.5% in the West Bank, Gaza’s economy declined by 15% said the International Monetary Fund, linking it to the harsh bombing by Israel of the Gaza enclave and the slow progress in its rebuilding.
Overall, the shrinking of the economy was equal to 1% of the gross domestic product. The IMF said that the economic activity shrank during 2014 following the Gaza war during the summer and the increased political tensions in East Jerusalem and the West Bank.
Following a mission to review the state of the Gaza economy, the IMF said a strong 2015 recovery was doubtful due to the continued refusal by Israel to hand over more than $128 million in clearance revenues that are due the Palestinian Authority for goods imported into Gaza and the West Bank.
In addition, reconstruction is moving along slowly in Gaza, partly because of a lack of true reconciliation amongst the factions within Palestinian politics and due in part to donors not coming through on pledges of supporting the rebuilding.
The IMF said that therefore real GDP for 2015 was set to increase marginally, with an increase in Gaza and a drop of close to 2% for the West Bank, although the steep decline in oil prices would provide relief to the energy consumers.
The turmoil last summer left the unemployment rate very high for both areas with 19% out of work in West Bank and over 41% in Gaza.
The withholding of the revenues by Israel will force a cut back by the governments in investment and spending, keeping the growth over the medium term modest, said the IMF.
The IMF gave praise to the Palestinian Authority for keeping the fiscal deficit under control. However, it said that assuming that the funds were released by Israel a large shortfall fiscally is expected.
The situation too could become worse due to the volatile environment and could become untenable due to the growing risk of strikes and social unrest that could create political instability.