In order to evaluate recent economic developments in the West Bank and Gaza, an International Monetary Fund (IMF) mission visited East Jerusalem and Ramallah between June 10-18. Following the visit, the IMF stated that the unemployment rate remains high, having reached 42 percent in Gaza and 16 percent in the West Bank.
Head of the IMF Commission Christoph Duenwald said prospects for GDP growth this year are subject to considerable uncertainty, while some risks require a cautious policy stance. Duenwald added, “assuming the political status quo, growth in the West Bank is projected to slow to 2 percent, from 5 percent in 2014."
According to the IMF, real GDP growth in the West Bank and Gaza is set to reach 3 percent in 2015, barely sufficient to create employment. Meanwhile, the fiscal position of the territories was under pressure during the first five months of the year, as domestic revenue growth has weakened relative to a high 2014 base while spending on goods and services, transfers and electricity has also increased. The Palestinian Authority’s deficit has been financed through a combination of domestic arrears accumulation and donor budget support.
In the short run, the IMF suggests the Palestinian Authority redouble efforts to mobilize donor aid. “The large financing gap projected for 2015 cannot be closed through measures only, and scaled up donor support for the Palestinian Authority is urgently needed,” the Fund has stated.
IMF’S Duenwald commented on the territory’s robust and well capitalised banking sector, however he also pinpointed the importance of safeguarding financial stability in a volatile environment.