Economic Challenges to the Palestinian Authority
Since September 2000, the beginning of the current
, the Palestinian
economy has deteriorated sharply. Real GDP per capita has fallen
by almost 40% and unemployment has almost tripled reaching 29% in
the mid 2004. Nearly 26% of the unemployed come from the public
The World Bank estimates that 21 percent of
the population was living in poverty (with less than $2.1 per day)
at the start of the Intifada. The number increased to 45 percent
in 2003, coupled with a high rate of population growth of 5 percent
The private sector has suffered the most from
the effects of the Intifada on the Palestinian economy. The on-going
conflict has particularly injured private agriculture and commerce.
the main supplier, competitor and market for Palestinian products.
About 90% of the Palestinian trade relies on Israel.
The Palestinian economy remains heavily dependent
on labor exports to Israel. According to the World Bank, Israel
provided jobs to 9% of the employed Palestinians in 2003 compared
to 22% before the start of the Intifada, thus contributing to 25%
of the Palestinian wage income.
Private sector credit has declined from over
$1 billion in September 2000 to about $794 million by August 2003.
The private sector suffers especially from high interest rates,
collateral requirements, and poor access to long-term loans. These
constraints are greater for small and medium enterprises than for
larger businesses. In addition, banks are challenged by the absence
or lack of implementation of an appropriate legal framework to guarantee
Palestinian firms are not globally competitive,
leading to low exports and a loss of local market share to imports.
Frequent border and internal closures and curfews
have dramatically increased investment risk, along with transportation
costs, leading to higher production costs and prices.