World Bank sees little sign of West Bank improvement

The World Bank said on Wednesday it saw little sign of an economic rebound in the West Bank, where Palestinian President Mahmoud Abbas' Western-backed government is based, despite billions of dollars in aid pledges.

In a report to donors meeting in New York next week, the international lending agency said foreign assistance to the Palestinians, meant to underpin US-backed peace talks with Israel, has been "ad hoc and unpredictable."

As a result, Abbas' Palestinian Authority cannot plan spending beyond a two-month horizon, the World Bank said.

The report said donors had provided the Palestinian Authority with about $1.2 billion in budget support to the end of August.

It also said Israel also undercut prospects for a substantial economic recovery by not doing more to ease restrictions on Palestinian trade and travel.

Under Western pressure, Israel has removed some of the hundreds of checkpoints and roadblocks that restrict Palestinian movement in the West Bank.

Palestinians call the obstacles collective punishment. Israel says they are necessary to stop suicide bombers from reaching its cities.

A World Bank official, speaking on condition of anonymity, called the changes made by Israel "isolated and partial".

"Despite some anecdotal indications that the West Bank could be experiencing an increase in economic activity, there is no evidence that this increase is substantial," the bank said.

The report cited International Monetary Fund estimates showing growth of 0.8% in the first half of 2008, reflecting "marginal" improvement in the West Bank economy and continued shrinkage in the Hamas-ruled Gaza Strip.

The Palestinian economy contracted by 0.5% in 2007.

The report said unemployment in the West Bank rose from 17.7% in 2007 to 19% in the first quarter of 2008. Unemployment in the Gaza Strip, which Hamas Islamists seized in June 2007 after routing secular Fatah forces loyal to Abbas, has increased from 29.7% to 29.8%.

Abbas responded to Gaza's takeover by sacking an elected Hamas-led government and by appointing his own administration, headed by Prime Minister Salam Fayyad, in the West Bank.

Western aid, frozen after Hamas won 2006 elections, has since resumed to Abbas' Palestinian Authority, while sanctions remain in place against Hamas' administration in Gaza.

In its report, the World Bank said an Egyptian-brokered ceasefire in the Gaza Strip has made little improvement in living conditions there.

While Israel allows in more humanitarian supplies, restrictions on the private sector remain largely in place, stunting economic activity.