Gaza has seen conditions steadily deteriorate over the last two decades, leading to collapsing of the economy and basic social services, the World Bank said in a report.
While additional cash inflows are urgently needed to bring relief to the difficult living conditions, a lasting recovery depends on a concerted strategy to revive the Gaza economy through access to external markets and expansion of commercial activities, Wafa reported.
The new World Bank report explores the nature of the rapid decline of the socio-economic conditions in Gaza and identifies what is needed to unlock sustainable growth. The report will be presented to the Ad Hoc Liaison committee on March 20 in Brussels, a policy-level meeting for development assistance to the Palestinian people.
“While additional aid is needed to provide humanitarian relief in the short term and ease the fiscal stress, it cannot continue to substitute for long term measures,” said Marina Wes, World Bank Country Director for West Bank and Gaza. “Serious commitments by all parties are needed to spur growth and jobs by putting in place the right conditions for a dynamic private sector. Without addressing the constraints, Gaza will continue to suffer with a heavy toll on its population,” she added.
Donor aid is urgently needed in the short-term to address the recent liquidity squeeze and improve dire humanitarian conditions, said the report.
Recent economic data revealed a drop in Gaza growth from 8% in 2016 to a mere 0.5% in 2017 with almost half of the labor force unemployed. The drop is attributed to a decline in inflows that has weakened reconstruction activity and led to a sharp decline in the income of a quarter of Gazans.
Access and quality of basic services such as electricity, water and sewerage are rapidly deteriorating and posing grave health risks. An additional destabilizing factor is the possible cuts to UNRWA funding—one of the main providers of jobs and services in Gaza. In fact, the cuts could risk income loss to 18,000 staff, and even more when counting their dependents.
Additional aid will be needed to avoid financial exacerbations. The potential reconciliation with Gaza, a positive for the territories overall, could increase the expected financing gap for 2018 from $440 million to $1 billion.
Measures proposed by the Palestinian Authority will not be enough to close the gap and it will resort to domestic sources of financing including debt from local banks and arrears to the private sector and the pension fund. This could eventually choke the economies of both the West Bank and Gaza with negative consequences on suppliers, banks and ultimately growth and tax generation.
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