Over the past ten years the Palestinian economy has been faced with a number of daunting challenges. The population growth rate, currently at 4.2 percent, is one of the highest in the world. The population is consequently very young, with 57 percent below the age of 20. The first major challenge has been to try to provide adequate education, housing, health care, and employment opportunities for such a young and fast growing population. The second major challenge has been to do this at the same time as building a Palestinian public administration, which did not exist prior to 1994, and without which the public services demanded cannot be effectively provided. This administration, with functioning institutions and legal system, has had to be created with very limited experience and resources. The third major challenge has been to undertake these tasks while coping with the consequences of conflict: the restrictions imposed by the Government of Israel (GoI), and the uncertainty stemming from unpredictable changes of the security situation as well as from the lack of agreement on the final status of the West Bank and Gaza (WBG).
Despite these challenges the Palestinian economy has proved to be more resilient than expected. Before the Intifada, between 1994 and 1999, the economy grew at a remarkable rate and was able to generate jobs and increase standards of living for its rapidly growing population. With the onset of the Intifada, the Palestinian economy went into a major decline.
But it did not collapse. The decline in economic activity was large by any standard, but given the extraordinary circumstances, the Palestinian economy proved surprisingly resilient. And by early 2003, there were already signs that the downward trend had been stopped and that the economy was beginning to stabilize.