World Bank: Aid to Palestinians doesn't spark economic growth due to Israeli restrictions

Friday June 05, 2009 12:19 by Katherine Orwell - 1 of International Middle East Media Center Editorial Group

The massive aid that has been given to the West Bank and Gaza had little to no effect on economic development, as Israeli restrictions on trade and movement haven't eased and continue to hamper Palestinian growth, the World Bank states in a new report.

Convoys with humanitarian aid waiting to be allowed to enter Gaza during the recent war - Photo by IMEMC's Katherine Orwell

Huge amounts of financial can slow economic decline, but can not revive the Palestinian private sector sufficiently to gradually diminish the dependence on external economic support, the World Bank elaborated.

The report acknowledges the huge potential for economic growth in the Palestinian economy, but sees no real opportunities for economic development as the major factor of poverty and underdevelopment is the Israeli system of restrictions in the West Bank and siege of Gaza.

If Israel would ease its restrictions, the World Bank projects considerable economic growth. Real gross domestic product growth could rise up to 5 percent in 2009, 6.5 percent in 2010 and 7.5 percent in 2011.

However, the report shows that in 2008 the gross national product per capita showed a 1 percent decline.

The Palestinian private sector is fading away, as the public sector is growing due to the large amount of international aid. In 2008, one third of the gross national product was made up out of aid. As a result, Palestinians are becoming more, not less, dependent on foreign aid, further harming the private sector and the potential of economic growth and development.

What little growth has occurred, has taken place in the West Bank,’ the bank said. In Gaza large sums pledged for reconstruction failed to produce tangible progress so far, due to the ‘extreme’ Israeli blockade on the Strip. The bank says that even if the need materials for rehabilitation are allowed into Gaza, this would not change the situation there so long as the private sector cannot freely import and export.

In previous years the World Bank has made similar alarming statements in its reports on the Palestinian economy. In 2007 it even warned that the Israeli siege of Gaza could lead to irreversible economic collapse.

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