Palestinian Economy in Gaza Is Collapsing, World Bank Says

(Bloomberg) -- The Palestinian economy in the Gaza Strip is collapsing under a decade-long blockade, as well as decisions by the Palestinian Authority and U.S. government to reduce payments to the area, the World Bank said Tuesday.

The economy contracted by 6 percent in the first quarter of 2018, and there are indications of further deterioration since then, the report said. Youth unemployment is at 70 percent, and every second person is living in poverty. The report will be presented to the biannual meeting of the Ad Hoc Liaison committee, an international donor group for Gaza, in New York on Thursday.

“A combination of war, isolation, and internal division has left Gaza in a crippling economic state and exacerbated the human distress,” said Marina Wes, World Bank country director for the West Bank and Gaza. “The economic and social situation in Gaza has been declining for over a decade but has deteriorated exponentially in recent months and has reached a critical point.”

Gaza, which sits on the Mediterranean coast, is fenced in by heavily-patrolled barriers on three sides bordering Israel and Egypt. Hamas, a militant Islamic movement that’s classified as a terrorist organization by the U.S., European Union and Israel, seized control of the area in 2007, ousting the Palestinian Authority.

The report also warned about conditions in the West Bank, which is governed by the Palestinian Authority.

“While the West Bank situation in not as dire currently, past consumption driven growth is faltering, and the economy is expected to slow considerably in the coming period,” the report said.

The bank called for both an immediate crisis response and a longer-term plan for sustainable development. Immediate steps are needed to address issues of energy, water, education and health, the report said.

The bank urged Israel to lift restrictions on trade and allow movement of goods and people, and said the Palestinian Authority should initiate policies and projects for sustainable economic development. The report refers only obliquely to Hamas’s role in Gaza’s crisis, citing the need for “legitimate institutions to govern Gaza in a transparent and efficient manner.”

(Unemployment data was corrected in an earlier version of this story.)

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