World Bank: Gaza Economy in ‘Freefall’

The Gaza economy is in “freefall,” the World Bank said in a report. According to the Bank, “the economy in Gaza is collapsing, suffering from a decade-long blockade and a recent drying up of liquidity, with aid flows no longer enough to stimulate growth according to a new World Bank report. The result is an alarming situation with every second person living in poverty and the unemployment rate for its overwhelmingly young population at over 70 percent.”

The report on the Gaza economy was presented at the organization’s biannual meeting last week. According to Marina Wes, World Bank Country Director for West Bank and Gaza, “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.”

According to the bank, Gaza’s economy contracted by 6 percent since the beginning of the year. A major contribution to that contraction has been the withholding of payments to Gaza by the Palestinian Authority, as well as cuts by the U.S. to UNWRA. PA-controlled areas of Yehudah and Shomron are also suffering, largely because of Israeli policies, the report said.

The situation is so dire that the economic deterioration “can no longer be counteracted by foreign aid, which has been in steady decline, nor by the private sector which remains confined by restrictions on movement, access to primary materials and trade. Moreover, the deterioration in the fiscal situation leaves the PA with limited scope to provide relief.”

As a solution, the bank “stresses the need for a balanced approach to the situation in Gaza that combines an immediate crisis response, with steps to create an environment for sustainable development. Among the immediate responses is to ensure the continuation of key services, such as energy, water, education and health.” In addition, “the Government of Israel could support a conducive environment for economic growth by lifting restrictions on trade and allowing the movement of goods and people, without which the economic situation in Gaza will never improve.

The PA should initiate policies and projects needed for sustainable economic development, including support for trade in digital services, which could play a leading role in the interim period. Legitimate institutions to govern Gaza in a transparent and efficient manner and reforms to create a positive business environment are also necessary for sustained economic recovery.”