Photo: Reuters
Gaza Strip
Photo: Reuters
World Bank report warns Gaza economy is in 'free fall'
Amid attempts made by Hamas to intensify border violence, World Bank releases a report claiming the strip's economy is facing 'immediate collapse' due to Israel's blockade and major aid cuts announced by US; report warns worsening financial situation will lead to escalation of hostilities.
The Gaza Strip's economy is in "free fall," a report from the World Bank warned Tuesday, calling for urgent action by Israel and the international community to avoid "immediate collapse."



The report was released ahead of a high level meeting of the bank's Ad Hoc Liaison Committee, responsible for coordinating development assistance to the Palestinians, on September 27.


According to the report, the unemployment is now over 50 percent—and over 70 percent among Gaza's youth.


Gaza Strip (Photo: AFP)
Gaza Strip (Photo: AFP)


Mark Aharon, director of the World Bank's economic program in Gaza and the West Bank, said in an interview with Ynet that Gaza’s economy faces a rapid economic decline.


"In the first quarter of 2018, Gaza's economy contracted by 6 percent, which is very significant, and it has continued to plummet ever since,” Aharon stressed.


Aharon predicts negative growth in the second quarter as well. He explained that although the Gaza blockade is a key factor in this economic trend, there are additional aspects that affect the situation.


Gaza Strip (Photo: Reuters)
Gaza Strip (Photo: Reuters)


"The Palestinian Authority's decision to reduce the monthly transfer of $ 30 million to the strip, the elimination of $ 50-60 million that was provided through US aid programs, and cuts to UNRWA's budget," all play a major role in the current crisis that has developed, according to Aharon.


Aharon also pointed out that the rate of school dropouts has increased, indicating that situation will continue to worsen in the future if no significant changes are made to stimulate Gaza’s economy.


The World Bank's economists, similarly to the defense establishment, see a direct correlation between the economic crisis and the surge of border violence.


"It is not surprising that the dire economic situation entails a violent reaction, and it is not surprising to me as an economist that the people feel desperate and do not feel that a change is ever going to happen,” he explained.


The bank is not involved in economic projects as part of a possible long-term ceasefire arrangement between Israel and Hamas.


Marina Wes, the World Bank's director for the region, reiterated the sentiments.


"A combination of war, isolation, and internal rivalries has left Gaza in a crippling economic state and exacerbated the human distress," she bemoaned.


Gaza Strip (Photo: AFP)
Gaza Strip (Photo: AFP)


Wes said the increasingly dire economic situation in Gaza "has reached a critical point."


"Increased frustration is feeding into the increased tensions which have already started spilling over into unrest and set back the human development of the region's large youth population," she added.


Gazans have staged near weekly demonstrations along the border with Israel since late March, in part to protest the blockade enforced by Israel and Egypt since 2007, when the militant group Hamas seized the territory. Hamas has led and organized the protests, but turnout is also believed to be driven by growing despair over blockade-linked hardship, including lengthy power cuts and soaring unemployment.


The report indicates the crisis can no longer be contained by the declining foreign aid or by the strip’s business sector—which suffers from restrictions imposed by Israel.


The sanctions imposed on Gaza by Mahmoud Abbas also add to the already deteriorating fiscal situation.


The Palestinian Authority itself suffers from a decline in financial donations and has an annual deficit of $ 1.24 billion.


The World Bank believes the solution to help improve Gaza’s economy is for Israel to lift restrictions on trade and movement of goods and people, and to develop "legitimate institutions to govern Gaza in a transparent and efficient manner."


פרסום ראשון: 09.25.18, 12:23
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