JERUSALEM (AP) — The Palestinian economy continued to grow in 2011, but a decline in foreign donor support and continued Israeli restrictions on trade slowed its pace, the World Bank said Thursday, warning of a “severe fiscal crisis” if the drop in aid continues.
In a biannual report, the World Bank warned that a continued decline in donor assistance could jeopardize the gains Palestinians made in recent years in building the institutions of a future state.
Donor countries have given billions of dollars to the Palestinians since 1993, in an attempt to prop up an economy battered by conflict with Israel and resulting restrictions on Palestinian trade and movement.
Representatives of donor countries are to meet next week to review the aid efforts.
Despite impressive growth in recent years, the report said further growth will remain highly aid-dependent unless the Palestinian private sector has room to grow.
It said this would only be possible if Israel lifted its restrictions on Palestinian access to land, water and export markets. It also called on the Palestinian Authority to improve its business environment and attract more investment.
Israel insists that it has eased travel and lifted restrictions, allowing the Palestinian economy to flourish, and that any constraints that remain are a result of vital security needs.
“Stabilization of the PA’s fiscal position compels immediate action by the donor community,” said Mariam Sherman, the World Bank director for the West Bank and Gaza.
“Unleashing the potential of Palestinian enterprises can be achieved only if Israel and the Palestinian Authority take concrete steps to level the playing field for entrepreneurs,” the World Bank said.
In 2011, the Palestinian Authority, which governs the West Bank, required about $1.5 billion in budget support, the report said.
Growth in the West Bank was only 5.8 percent in 2011, down from 7.5 percent for the corresponding period in 2010.
In contrast, the Hamas-run Gaza Strip continued to recover in 2011 and experienced 25.8 percent GDP growth in the first three quarters of 2011, the report said.
The Gaza figures can be explained in part because of the isolated territory’s low starting point. For instance, it experienced a decline of 20 percent as recently as 2007.