WASHINGTON: The war between Israel and Gaza drove the Palestinian economy of Gaza and the West Bank into its first contraction since 2006, the International Monetary Fund (IMF) said on Thursday.

While the West Bank managed a 4.5 per cent expansion last year, Gaza’s economic activity declined by about 15pc, the IMF said, linking it to Israel’s harsh bombing and shelling of the Gaza enclave and slow progress on rebuilding.

Overall, the contraction amounted to about 1pc of GDP.

After a mission to assess the state of the economy, IMF said a strong recovery this year was also in doubt due to Israel’s continued refusal to hand over some $127 million worth of clearance revenues due to the Palestinian Authority on goods imported into the West Bank and Gaza.

“These represent about two-thirds of net revenues and are essential to the PA’s budget and to the Palestinian economy,” it said.

“Reduced wage payments and other public spending cuts necessitated by the suspension of clearance revenues in the presence of financing constraints will likely cause a sharp reduction in private consumption and investment.”

Moreover, it added, reconstruction in Gaza is moving slowly, partly due to a lack of real reconciliation among factions in Palestinian politics, and partly due to donors not following through on their pledges to support rebuilding.

“Real GDP in 2015 is therefore set to rise only modestly, with a pickup in Gaza from a low base and a drop of nearly 2pc in the West Bank.”

The turmoil has left unemployment very high in both areas, 19pc in the West Bank and 41pc in Gaza.

Published in Dawn January 31st, 2015

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