UN report warns of unprecedented severe crisis in Palestinian economy
Palestine, Economics, 8/24/2001

With the Palestinian economy mired in a crisis of "unprecedented" depth and severity, a genuine recovery will take years and will need substantial resources even if there is a quick end to the region's current political problems and a resumption of normal economic activity, a new United Nations report warns.

The semi-annual report by the UN's Special Coordinator for the Middle East examines the effect of the political and security crisis, which erupted late last year, on the annual economic performance for 2000.

According to the report, the factor most responsible for negative developments in the fourth quarter, and consequent effects on annual development, is the combination of movement restrictions and border closures imposed by Israeli authorities. As a result of those policies, the Gross National Product (GNP) fell 7.6% in 2000, instead of the 6% growth projected earlier last year by the International Monetary Fund and the Palestinian Ministry of Finance.

The Special Coordinator estimates that during the fourth quarter of 2000, economic activities in the West Bank and Gaza dropped 51% for an income loss of $671 million.

Furthermore, declining employment in the fourth quarter, combined with high population growth, caused per capital income for the year to decline by 4.1%. Persistent high unemployment, combined with decreasing participation in the labor force and increasing dependency rates, suggests that living standards for the Palestinian population may continue to decline in 2001.

The Special Coordinator says that after three years of economic recovery following the previous crisis in 1996, the current shock will undoubtedly take even longer to overcome. "Even if a political resolution is reached quickly and brings with it a full lifting of movement restrictions and resumption of 'normal' economic life, genuine economic recovery will take years and will require substantial resources and sustained policy attention from all stakeholders in Palestinian economic and institutional development," the report says.

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